Used Car Market in India: Factors driving the sector and major startups.
2 min read
Founded in 2015 by Niraj Singh, Ramanshu Mahaur, Mohit Gupta, Ganesh Pawar, Spinny becomes the 42nd unicorn to reach a value of $1.75 billion. 3 used car startups: Droom, CARS24, and now Spinny have entered the unicorn list in 2021 itself and are valued above $1.5 billion while Cardekho reached the valuation in 2020. Not just this, Droom Technologies has filed papers for IPO to raise ₹3000 crores. Also recently Cars24 has announced to launch 7 company-owned refurbishment centers.
Let us understand the focus on used automobiles in detail:
– The used car market is expected to grow to $70 billion by 2026 growing at a CAGR of 30% The ratio of a new car to a used car is 1: 2.2, i.e. for every 10 new cars sold, there are 22 old cars available in the market.
Among the used car buyers, 43% are willing to buy hatchbacks followed by 26% willing to buy SUVs.
– Reasons for increased demand in the used car categories are:
1) More economical – The value of a newly bought car depreciates by 30% in the first year of its purchase.
2) The ownership period – The time a person owns a car, had reduced to 3-4 years from the earlier 6-7years.
3) Increased use of social media: It has led to increased demand for premium and luxury stuff. Cars are no different. A 1-2 year pre-loved luxury car costs way less than a brand new one.
– Players in the market:
First Choice, Cars24, CarDekhko, Droom, Spinny, CarTrade.com, Mahindra, Maruti Suzuki, True Value, Olx, etc.
– Of the 40 lacs units of used cars in FY21,
The organized sector shares 20% of this pie while the remaining 80% continues to be sold via unorganized sectors.
– Of this 20%, i.e. 8 lacs vehicles, the traditional players Maruti Suzuki India Limited, Mahindra First Choice commands 56.25% of the share i.e. 4.5lacs. While the startups such as CarDekho, Cars24, etc get the remaining of the pie.
– The major reason for people now shifting towards these new platforms is that they help in the entire process from verification to financing to insurance.
– The automobiles market in India is being disrupted like never seen before. The advent of the pandemic, increasing incomes, and infrastructure has bought new dawn.
With the new scrapping policy, increased focus on electric vehicles improved BSVI norms how the industry unfolds next will be interesting.
