Summary

The India used car market was valued at USD 27 billion in 2020, and it is expected to reach USD 50 billion by 20206, registering a CAGR of 15% during the forecast period, 2021-2026.

The COVID-19 pandemic had a minimal impact on the industry. With the increased number of people preferring individual mobility and more finance options infused into the used car market, the market is set to grow considerably. Reduced cash inflow due to the pandemic has forced buyers to look for alternatives other than new cars, and the used car industry has great growth potential in these terms. With the sales and production of new vehicles hindered due to the pandemic, the immediate option for the buyers is the used car market.

The used car market evolved in the country, with the growth of the organized and semi-organized sales sectors. The pre-owned car market recorded sales of 4.4 million units in FY2020 as compared to only 2.8 million units of new passenger vehicles in the same year.

With the new BS-VI emission standards implemented by the Government of India, the technological cost of cars to meet the standards will be undertaken by consumers. Additionally, according to the MD and CEO of Mahindra First Choice Wheels (MFCW), the company's focus on reducing the production of diesel cars, with Maruti Suzuki's decision to exit the diesel car segment by April 2020, is also expected to increase the demand for compact diesel cars in the price and mileage sensitive Indian market.

Factors such as standardized dealership experience, high price experience, and high financing cost for used cars may hinder the growth of the used car market. Some of the major players dominating the market are OLX, Mahindra First Choice Wheels, Cars24, Maruti True Value, Hyundai H Promise, and Droom, among others.

Key Market Trends

The Organized Channel is Expected to Register a Higher CAGR

The organized segment in the India used car market is expected to witness a CAGR of 22.79% during the forecast period.

The organized sales channel witnessed significant growth in the last three years. This growth is driven by increased sales of used cars in metro cities and a rise in online sales platforms, such as CarDekho, Cars24, and Droom.

The majority of the OEMs have already entered the used car market, and those who have not entered the used car market in the nascent stages have also entered the market during the last five years. Renault started the pre-owned car business in 2015, and Nissan had introduced the firm in 2017.

Significant OEMs in India, such as Maruti Suzuki, Mahindra, Hyundai, and Toyota, and luxury car manufacturers, such as BMW, Audi, and JLR, have their used car networks.

For instance, Mahindra First Choice Wheels recorded healthy annual sales of USD 51 million by the end of FY2020.

The company sold more than 250,000 used cars during the same period, and it aimed to increase this figure by 40% by 2020. Currently, MFCW has 1,100 outlets across India. By 2020, the company planned to increase the outlets to 1,200, out of which 11 outlets may be dedicated only to the sale of luxury cars.

The Indian car manufacturing giant Maruti Suzuki also entered the used cars market with its True Value chain, wherein the cars go through various quality tests before they are set up for sale.

Additionally, the online used car sellers registered good sales during 2017-2019. CarDekho has been a pioneer in the online used car market, recording a Y-o-Y growth rate of about 100% over the last three years.

Furthermore, consumers prefer safety, transparency, convenience, and negligible risk while purchasing used cars, which, in turn, indicates that the organized sector of used cars is projected to rapidly grow in terms of market share with immense growth potential.

Growing Demand for Luxury Used Cars

The used car market is witnessing a boom in the country, with the demand for luxury cars continually increasing.

Until few years, owning a luxury car used to be a dream for numerous consumers, owing to financial hurdles, but this is gradually changing as consumers can easily buy used luxury vehicles. Heavy depreciation in luxury car prices has made these vehicles a preferred choice in the used car market. As per OLX, used luxury vehicles priced over INR 15 lakh were the preferred choice among consumers. According to OLX, over 55,000 luxury cars (priced above INR 15 lakh) were listed on OLX every month, and the supply of premium cars jumped by over four times in 2017.

Some major factors driving the growth of the used luxury cars include the high rate of depreciation value of luxury cars, fast-growing young population, increasing disposable income of consumers (along with rapid urbanization), and growing internet penetration in non-metros.

As per automobile dealers, the demand for used luxury cars has been growing at approximately 35% - 40% on a year-on-year basis, as owners of luxury cars usually sell off their vehicles after a year or two years, as they desire for upgraded and better models. Additionally, apart from the reasons, majority buyers of these vehicles are from Tier-1 and Tier-2 cities.

On another note, over 75% of used cars purchased are sedans and hatchbacks due to their practicality and low-maintenance costs.

Competitive Landscape

The market for used cars in India is consolidated, with significant players holding the largest share of the market due to their business models and increased number of pre-owned car retail outlets. The major players include OLX, Mahindra First Choice Wheels, CARS24, Maruti True Value, and Hyundai H Promise.

Other players, such as Quikr, Honda Auto Terrace, Ford Assured, and Toyota U-Trust, have been expanding their outlets and operations in the local market. The unorganized sector occupies nearly 80% of the total market, which has been gradually shifting toward the organized sector in recent years.

A new company in the block, Big Boy Toyz, is in the market with an exclusive luxury, supercars, and hypercar line-up of preowned cars in its inventory. It is currently based in three Indian cities and deals with about 30 luxury carmakers.

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Table of Contents

1 INTRODUCTION
1.1 Study Assumptions
1.2 Scope of the Study

2 RESEARCH METHODOLOGY

3 EXECUTIVE SUMMARY

4 MARKET DYNAMICS
4.1 Market Drivers
4.2 Market Restraints
4.3 Industry Attractiveness - Porter's Five Forces Analysis
4.3.1 Threat of New Entrants
4.3.2 Bargaining Power of Buyers/Consumers
4.3.3 Bargaining Power of Suppliers
4.3.4 Threat of Substitute Products
4.3.5 Intensity of Competitive Rivalry

5 MARKET SEGMENTATION
5.1 By Vehicle Type
5.1.1 Hatchbacks
5.1.2 Sedans
5.1.3 Sports Utility Vehicles
5.2 By Vendor Type
5.2.1 Organized
5.2.2 Unorganized
5.3 By Fuel Type
5.3.1 Petrol
5.3.2 Diesel

6 COMPETITIVE LANDSCAPE
6.1 Vendor Market Share
6.2 Company Profiles
6.2.1 CARS24
6.2.2 Maruti True Value
6.2.3 Mahindra First Choice Wheels
6.2.4 Hyundai H Promise
6.2.5 Honda Auto Terrace
6.2.6 Ford Assured
6.2.7 Toyota U Trust
6.2.8 Big Boy Toyz
6.2.9 BMW Premium Selection
6.2.10 Audi Approved Plus
6.2.11 Mercedes-Benz Certified
6.2.12 Car Trade
6.2.13 OLX

7 MARKET OPPORTUNITIES AND FUTURE TRENDS

8 ASSESSMENT OF THE COVID-19 IMPACT ON THE MARKET