Used car sales kick into high gear and prices rise 10-15%
Chennai: Thinking of buying a used car? Chances are the model you’re looking for has become 12-15% more expensive. According to organized used car retail platforms such as Droom, Mahindra First Choice Wheels and Spinny, demand for advanced equipment from backcountry markets is driving used car sales, driving a price increase of 12 to 15%. The price increase reached 20% in the unorganized sector.
“Used car prices have risen over the past five months, driven by a surge in demand and inflationary pressures. Previously a three-year-old vehicle was 40% cheaper than its new version, now it has gone to 30-34% online and for physical platforms the gap is around 25%,” said Sandeep Aggarwal, founder and CEO of automotive retail unicorn Droom. Technology. The price spike is understandable given the demand for used vehicles. “For us, the growth was 55% in the last quarter,” said Ashutosh Pandey, CEO of Mahindra First Choice Wheels.
Used car retailers say two factors are responsible for this turbo charge. First-time car buyers are opting for used vehicles as new car prices have risen sharply over the past 24 months due to BS6, rising commodity prices and chip shortages. “In the first quarter of 2022, more than 55% of car buyers on Spinny were first-time buyers. People between the ages of 25 and 40 bought most of these cars, of which 26% were women and 80% opted for the convenience of door-to-door deliveries, while 41% of Spinny shoppers opted to buy online. line,” said Niraj Singh, founder and CEO of used-car unicorn Spinny. In addition to first-time buyers, consumers in the hinterland are also contributing to demand.
“The demand for used vehicles has now deepened in Tier 2, 3 and 4 markets,” said Aggarwal of Droom. Its platform has nearly doubled its presence to 1,164 cities, from 600 to 700 just four years ago. This expansion of the organized retail footprint is also driven by demand for larger vehicles. “There has been a massive increase in SUV demand over the past six months with models like Mahindra Scorpio and Maruti Suzuki Vitara Brezza as well as newer models like Kia Seltos and MG Hector, but there is a shortage of SUVs. sourcing in this segment,” said MFCW’s Pandey. “The demand for luxury used cars is also high, with Rs 27-45 lakh being the sweet spot,” he added.
The growing appetite for higher-end used cars means that the complexion of the used car market is also changing rapidly. “Previously, 50% of our sales were mainstream cars (Rs 3-5 lakh) while mid-market (Rs 5-10 lakh) was 30%,” Droom’s Aggarwal said. “Now that split is 40:40, showing that the mass has contracted and the middle market has expanded.” Models like Hyundai Creta, Mahindra XUV500 grew three times faster than mass market cars. According to a Frost & Sullivan report, used car sales are estimated at 3.8 million units. “Studies show that by 2026 it will become a $50 billion industry, indicating that the used car industry could register a CAGR of 15% over this period,” Spinny’s Singh said. .