What's pushing India's used car market? Explained here

The used car market in India is witnessing a rapid surge in demand. While the new car sales are witnessing a slow revival after the pandemic shock in 2020 and turbulent performance in 2021, the used car market is continuing to see a constant growth in demand. There are multiple factors that are playing key roles behind this growth. Increased digitalisation and entry of automotive startups with new and innovative business models are aiding the growth in the Indian used car market.

Besides that, other factors such as increased preference for personal mobility, consumers' dilemma over buying large ticket purchases like cars are also playing key roles behind the decision to buy pre-owned vehicles.

According to a study by OLX Autos and rating agency Crisil, the used car market in India is expected to reach a volume of a whopping 70 lakh units in 2025-26, from 38 lakh units in 2020-21. The study points that the factors such as the Covid-19 pandemic, digitalisation, wide availability of financing options, first-time buyers, changing consumer perception and changing demographics and aspirations will play a crucial role in the growth of the pre-owned car market.

Here are some key factors driving growth in this segment.

Preference for personal mobility

In the wake of the Covid-19 pandemic, preference for personal mobility has increased substantially. Consumers are avoiding public transportation and even shared mobility options as well. Instead, they are focusing on buying personal vehicles for themselves and family. At the same time, a dilemma over buying a large ticket product like a car is something bothering them. balancing between these two sides the solution is buying used cars. This is a key reason amplifying the growth of used car sales in India.

Startups fuelling the growth

There is a wide range of automotive startups in the market that has emerged in the last couple of years. The number of these startups are increasing rapidly across India. These startups not only offer used car sales and buying platforms to the consumers, but they are also offering attractive deals to the buyers with easy financing options and other benefits such as a free warranty period, certified vehicles etc. These are key factors playing important roles behind the growth of used car sales in India.

Changing consumer perception

Gone are the days when people wanted to buy only new vehicles. The attractive value proposition offered by good condition used cars is changing the perception of the consumers. Not only recurring car buyers but first-time consumers too are showing interest in buying pre-owned cars. According to the study, the share of first-time buyers expanded by 8-10 per cent during FY21 in the backdrop of the Covid-19 pandemic. Restricted availability of public transport, increased preference for personal mobility, growing urbanization and nuclearization too are key factors behind this growth.

Fear of infection in shared mobility

With the emergence of shared mobility aggregators such as Ola and Uber, people focused on saving money and availing the comfort of relatively personalised transportation. However, the Coronavirus pandemic has changed the situation and people are refraining from using the app cabs due to the fear of Covid infection. In short, the pandemic brought back interest in personal car purchases. At the same time, employment uncertainty, salary cuts, job loss created a sense of insecurity. This is fuelling the demand for used car sales. The study claims that compared to the pre-Covid times, demands for pre-owned cars shot up 20-30 per cent after the unlocking in CY2020.

Entry of legacy players generating interest

One of the most important factors that have been aiding the growth in the interest of consumers for purchasing used cars is the entry of legacy players in the segment. The auto manufacturing companies such as Maruti Suzuki, Mahindra, Tata Motors, Hyundai, Toyota etc have their own dedicated pre-owned car sales channel. Even luxury carmakers like Mercedes-Benz and Audi too have entered the segment. Kia is one player that is gearing up to enter the segment. These OEMs entering the used car market is attracting consumers with reliability in pre-owned cars.