Pre-owned car market in India may double to 8.2 m units by FY27: Report

Pre-owned car market in India may double to 8.2 m units by FY27: Report

Nov 23, 2022

Growing at a CAGR of 16%, the pre-owned car market is expected to double from 4.1 million units in FY22 to 8.2 million units in FY27, increasing its lead by 1.7X over the new car market, the report said.

New Delhi: The pre-owned car market in India is expected to double to 8.2 million units over the next 5 years, as per the 6th annual edition of OLX Autos report in partnership with CRISIL.

“Growing at a CAGR of 16%, the pre-owned car market is expected to double from 4.1 million units in FY22 to 8.2 million units in FY27, increasing its lead by 1.7X over the new car market,” it stated.

During this period, the new car market is expected to grow at a CAGR of 9% -11%, reaching 4.8 million to 5 million cars by FY27. Market share for UVs at 49% surpassed those of both small cars (45%) and sedans (3%) combined in FY22.

In the pre-owned car segment too, UVs have increased their share from 17% in FY17 to 22% in FY22. Over the next 5 years, UVs will continue to experience accelerated growth of 3X, reaching a market share of 32% in the pre-owned car market.

“This segmental shift towards UVs in the pre-owned car market will further help uplift the average price of a pre-owned car, leading to a 2.5X growth in the overall value of the pre-owned car market, over the next 5 years, from Rs. 1.8 trillion in FY22 to Rs. 4.1 trillion in FY27, growing at a CAGR of 19%,” the report noted.

Amit Kumar, CEO, OLX India, said, “There is a clear preference for pre-owned cars among consumers in larger towns, fuelled by an accelerated shift to digital channels - that offer higher convenience and build consumer trust. Urban markets drive the bulk of the demand for cars in India. With 37% of the Indian population living in urban areas by 2025, we will see a sharp rise in disposable incomes and affordability for discretionary spending on personal mobility.”

According to the report, the most popular UVs in the pre-owned car segment as per OLX platform data are Hyundai CRETA, Maruti Brezza, Maruti Ertiga and Mahindra XUV500.

Small cars no doubt dominate the pre-owned segment commanding 58% of all cars, with Maruti maintaining its dominance. The share of small cars will contract marginally by 2% to 56% by FY27.

The report noted that the most popular small cars as per OLX platform data considering the average vehicle age of 5 years in the pre-owned segment are Maruti Baleno, Hyundai Elite i20, Renault KWID, Maruti Suzuki Dzire and Hyundai Grand i10.

It expects the large car or sedan pre-owned segment to see the most contraction, declining from 12% share in FY22 to 7% in FY27 owing to the declining sales in the new car market, lack of new model launches and a shift in preference towards UVs. Honda City continues to be India’s favorite sedan in the pre-owned segment.

This segment shift to UVs in general will have a domino effect in terms of the age of the cars in the pre-owned segment. The availability of younger vehicles will be much larger and also preferred.

The share of cars that are in the age bracket of 0 to 7 years, would form nearly 58% of available cars in the pre-owned segment in FY27, adding tremendously to its attractiveness and preference among buyers. Thus in FY27, the number of cars in the 0-7 age bracket would be 2.2X that of FY22.

Preference for UV and vans is relatively higher in the East region, while within cars primarily cheaper, lower compact/ basic hatchbacks priced in the Rs 2-3 lakh range are preferred. The average age of vehicles was also higher in the East at - 6-8 years, compared to other regions.

As per the report, favourable regulatory requirements will help propel the growth of the organized and digital sector. Recently, MoRTH has issued a draft notification setting down guidelines and new regulations for the vehicle resale market whereby dealers would be required to get an authorization certificate to identify their authenticity. The introduction of BH registrations by the Government will also simplify interstate vehicle transfer and will enable free transaction of cars across state borders.

The report noted that the pre-owned car financing market is expected to grow at a CAGR of 25% from INR 360 Bn to INR 1275 Bn by FY27.

Expected premiumization in vehicles would drive up average vehicle prices and in turn average financing value per car in the pre-owned car market. Finance penetration (pre-owned cars financed out of total pre-owned cars sold) will grow significantly from 25% - 30% in FY22 to 35%-40% in FY27.

“Post pandemic, the Indian automobile sector has shown strong growth both in the new car as well as the pre-owned car markets. Increased preference for personal mobility, easing supply-side constraints, increased discretionary and the shift in product-mix are contributing towards the sector’s growth,” Hemal Thakkar, Director, CRISIL Research, said.

Source - auto.economictimes.indiatimes.com

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