New Delhi: The Indian used car market is expected to reach a size of over 70 lakh vehicles by 2025-26, up from 38 lakh in 2020-21, growing at around 12-14 per cent over the next few years, according to a study.
The pre-owned car industry is expected to clock a growth rate of 15 per cent in FY22 as the COVID-19 pandemic, digitalization, changing demographics and aspirations, first-time buyers, and availability of financing options acting as growth drivers, as per the OLX Autos-CRISIL Study 2021.
“The pre-owned market has been outpacing the new car market, and the industry is expected to clock a healthy growth rate of 15 per cent in FY22,” OLX Autos said in a statement.
“The prospects continue to be bright on the longer horizon, with a 12-14 per cent CAGR expected over the next few years, taking the size of the market to more than 7 million vehicles by FY26, from 3.8 million units in FY21,” it added.
The study found that with many people preferring socially-distanced personal mobility, during and because of the pandemic, the pre-owned car market is expected to continue to be a sunrise sector.
Commenting on the findings, OLX Autos India CEO Amit Kumar said,”The preference for personal mobility has propelled a huge swing in favour of used-car sales that are expected to reach a phenomenal ‘1.5x’ more than that of new car sales over the next five years.”
He further said,”The digital switch has been highly transformative, bringing in its wake increased transparency, trust and a huge choice of new generation vehicles to the consumer. The unique customer insights from the study will introduce further innovation in the sector.”
According to the study, the pandemic has had an impact on the market and consumer behaviour, bringing back the interest for owning personal vehicles and “this trend is unlikely to abate in the near term.”
Earlier, with the emergence of shared mobility players like OLA and Uber, many customers had deferred purchasing personal vehicles, especially in metro cities, it added.
“During the first wave of the pandemic, supply crunch and increased demand impacted stock (of pre-owned cars) levels across regions, mainly in the South and the West where inventory levels came down to 30-35 days, from the typical 45-50 days,” the study said.
Supply levels are slowly normalising in 2021 with improved mobility, lesser restrictions, and lower reluctance to sell vehicles, it said, adding as new car vehicle supply improves, pre-owned car supply is also increasing.
“Compared to pre-COVID levels, the demand shot up 20-30 per cent after the unlocking in CY2020. Demand improvement was more pronounced in the South, followed by the West, while demand growth was relatively lower in the East post lockdown. The pandemic also witnessed a sudden increased traction for cheaper, smaller, fuel-efficient cars,” it said.
The study also found that there is a rise in preference for utility vehicles with its share in the pre-owned car market increasing to 20 per cent in FY21, up from 18 per cent in FY18. In terms of age of vehicles, during FY21 vehicles aged 5-7 years dominated the market with 31 per cent share, followed by vehicles of 8-10 years with a 29 per cent share.