Tier-II and Tier III cities are playing a key role in expanding the used car business in the country, found the ‘Indian Pre-owned Car Market Study’ conducted by Frost & Sullivan and Volkswagen India.
Currently witnessing strong growth, the study estimated that the used car market will touch 8.2 million units by FY25 from 3.8 million units of FY21. The majority of growth will come from the Tier-II and Tier-III cities.
Answering a question from Mobility Outlook, Kaushik Madhvan, Vice President, Mobility (Automotive & Transportation) Practice, Frost & Sullivan said the general spending trend in Tier-II and Tier-III cities has increased because of multiple factors. An increase in average salary, the proliferation of multi-brand FMCG, and rise in online transactions with smartphones have all contributed to an upward trend in spending, which is also reflected in cars.
The pandemic has given rise to personal mobility and the desire to own a vehicle is much stronger in Tier-II and Tier-III cities than in metros, he said. This is contributing to the growth of pre-owned vehicles in these areas. At the same time, organised players are also penetrating these areas.
The study also revealed that organised platforms would contribute 45% to the total pre-owned car market by FY2025.
Ashish Gupta, Brand Director, Volkswagen Passenger Cars India said if one analyses the growth of the country, growth is coming from the Tier-II and Tier III cities be it in terms of business, demand and wealth creation.
The study highlights that the market share in the organised sector will touch 45% by FY25 from the current 25%. Gupta said this is a clear indication of the change in consumers’ preference in personal mobility.
“Used car sales will see further growth as compared to new car sales. With the aim to tap this growing opportunity, we are relentlessly working towards strengthening our offerings for customers through our national pre-owned car network, Das WeltAuto (DWA),” Gupta said.
The study also found that for 72% of the current owners, the desire to own a car is the most dominant purchase ‘driver’. There is high preference towards purchasing mid-variant models, followed by top variant amongst both owners and intenders.
At the time of purchase, the study found that the average age of a used car is 3.5 years. Three-fourth of all customers believes that lower price strongly drives purchase from individual direct sellers.
Among other findings, the study found that 70% of used cars sold are under INR 500,000. Used car finance penetration, meanwhile, is expected to touch 35% by 2025 from the existing 21%.