NEW DELHI- Covid2019 battered the automotive industry in India with the demand for new cars and two-wheelers plummeted between March-May 2020. The month of April 2020 has gone down in the history of the country when not even a single car was except a few that were exported out of the country. The industry started to pick up since May 2020 and has been showing signs of recovery. Even then at a cumulative level, the first half of the year 2020 has battered the auto industry, even worst then the last year. In passenger vehicles, in particular, the April-June period saw sales drop of 78.43 percent, making it possibly the worst-ever quarter since the time such data were being compiled.
Covid2019 actually forced people to think twice before making investment into a big ticket purchase like cars. As a result, it created a window for the already existing new car market to grow further. Several brands have reported that there is an increased number of inquiries from customers around used cars. These include brands like Maruti Suzuki True Value and Hyundai’s H Promise.
Maruti Suzuki India Limited executive director marketing and sales, Shashank Srivastava said, “During lockdown scenario, most media got impacted due to restrictions and hence their consumption. In New normal, ensuring customer safety and communicating safe practices is of utmost priority.”
As per experts, the car buyers who had plans to buy new cars will opt for used cars seeing the economic uncertainty and the tougher times ahead. As economic activities resume, people prefer personal cars over public transport for the fear of being affected by the virus and to follow the physical distancing norms. This will give an impetus to the used car business.
People will either go for two-wheeler or pre-owned cars. Historically, it has been that whenever there’s an economic downturn people gravitate towards pre-owned goods as they are cost-effective.
Covid2019 has created a great opportunity for brands like Droom, CARS24, Olx, Mahindra First choice, and others in the space. They are aggressively promoting their products and released campaigns to connect with their consumers.
CARS24 rolled out a 360-degree campaign with MS Dhoni that talks about how CARS24 can help connect sellers with buyers directly making the process more transparent and easier for its new-age customers.
OLX CashMyCar is also doubling down digital presence across platforms. Maruti Suzuki also launched a 360-degree campaign on ‘Buy & Sell’ for True Value before the lockdown happened.
CARS24 co-founder and CMO Gajendra Jangid explains, “the size of the used car industry is 1.3 times the size of the new car market, in other words, used cars accounted for 55 percent of total 7.5 million car transactions in India. We are expecting a steady growth in demand post lockdown period due to the shift in budgets.”
He further said, “According to our recent research study, we saw that Intention to use private cars by consumers increased by 41 per cent and 22.5 per cent people who were preferring to buy new cars earlier are now shifting to pre-owned cars which looks promising for the pre-owned auto segment.”
However, since the time economic activity resumed, several automobile brands have also launched new products that were on hold. They are realigning new strategies to connect with the target audience.
OLX CashMyCar business head Amit Kumar shares that the launch of new models will definitely help the pre-owned car market as consumers will have a wider range of brands and models to choose from across price ranges.
Kumar explains, “Pre-owned car market actually benefits from the increased activity in the new car market. “An important source of pre-owned market supply is the new car sold on the exchange. So, more new cars entering the market augurs well for the pre-owned car market as this would result in the availability of fresh new models with the latest features.”
However, the used car market in India is highly unorganized, only a few organized players are operating in the market. The organized market contributes only 18 percent of total pre-owned cars sold in the country. The used car market size is around 1.5-1.7x (times) of the new car market. As per estimates, over 4 million pre-owned cars were traded and sold in FY19.
Increase demand, the rise in personal mobility.
Covid2019 has impacted the consumer’s behavior and preferences towards their commute choices. He prefers personal mobility over public transport.
According to Jangid, as social distancing is the primary norm of the ‘new normal’, people are inclined towards commuting through their personal vehicles. But at the same time, they are looking for more affordable and budget-friendly deals as well. “This is the reason behind people moving more towards owning a pre-owned vehicle that fulfills both requirements. Further to the resumption of the services as soon as Unlock was announced, we have witnessed a surge in used car sales, he said.”
However, during economic stress, customers are expected to downgrade their demand due to declining affordability and enhanced focus on functionality.
Srivastava explains, “Nearly 85 percent pre-owned car customers are two-wheeler upgrades. We are confident that the current situation and sentiments will have a positive rub off on the used car market as the price of the new vehicle would be higher.”
He further adds that telescoping of demand is expected to happen due to economic stress and customers will give more importance to functionality buying, Customers who were earlier planning to buy a Swift top variant may now consider the base variant. “First-time buyers are also expected to increase,” adds Srivastava.
The used car market has registered healthy growth in India in the last few months. According to statistics released by the Society of Indian Automobile Manufacturers’ (SIAM), pre-owned vehicle segment that accounts for 18 percent of the market share, registered estimated sales of 4.4 million units, whereas the new passenger vehicle sales in FY 20 stood at 2,775,679 units, dipping below the 3 million sales unit mark for the first time since FY17.
Kumar concluded by saying, “Pre-owned cars could see an increased supply of new car models. Buyers of pre-owned cars now would also prefer transacting with their local sellers instead of traveling to far off places which would further boost their local economy.” He also believes that the pre-owned industry will adopt digitization as a key pillar to ensure business continuity.
