Volkswagen's pre-owned car biz booming in India

Volkswagen Passenger Cars India is set to rebrand its used car business, Das WeltAuto, to Volkswagen Certified Pre-Owned, attaching its flagship brand to the business and marking a significant shift in its strategy.

This comes in the context of rapid growth in India’s used car’s market. According to the IndianBlueBook, he used car industry in India is currently worth about Rs 2,660 billion and is expected to grow to nearly Rs 5,986 billion FY28.  In terms of number of cars, the market is expected to balloon to 8 million from 5.2 million per year at present.

However, as it stands today, demand and supply are not fully in sync, says Ashish Gupta, the Brand Director of Volkswagen Passenger Cars India. “Currently, in the used car market the demand is more than the supply. More customers are looking for young used cars, around three to five years old. Whereas the availability of cars is five years and beyond. That's driving the demand or selling prices in the market,” he points out.

The demand-supply imbalance is skewing pricing, says Gupta, adding that used car prices are rising 8-10% per year. “Increasingly the difference between a used car and a new car buyer is diminishing. Price points for new cars used to be twice of a used car. Now, many customers are preferring to go for used cars as their first car,” Gupta adds.

In this context, Volkswagen has decided to sharpen its focus on its used cars business. The idea behind the new brand, says Gupta, is to extend Volkswagen’s brand trust and quality assurance to the used car segment.

“As a brand, it makes more sense from our point of view to project similar brand values across both our businesses. That’s why we’ve taken a call that this year we’ll transition from DasWelt Auto which is already a big brand to Volkswagen certified pre-owned,” he said.

The rebranding of Das WeltAuto — launched in India in 2012 — is more than a name change, says Gupta. It signifies Volkswagen's commitment to extending its brand trust and quality assurance to the used car segment, and ensuring customers perceive the same level of trust and reliability in Volkswagen's pre-owned cars as they do in new ones. "We do not differentiate between our used car customers and our new car customers. The trust that customers have in the Volkswagen brand can now translate into our certified pre-owned business." A key aspect of Volkswagen's strategy is improving customer access to vehicle service history, which is a crucial factor for buyers. To this end, Volkswagen has introduced a service record accessibility feature, allowing customers to obtain a car's service history for a small fee. "One of the top three things customers look for before buying a used car is the service history," says Gupta. "For Volkswagen cars, customers can get a complete service record by paying a small fee, which builds confidence in the vehicle’s condition."

Demand for SUVs are high

"Whether it’s the new car customer or a used car customer, the aspirations are the same," Gupta notes. ”Your purchasing power may be different, but the trends in the new car market definitely translate into the used car market as well. India traditionally has been a hatchback market five or six years back but preference of SUVs is growing even in the used car space,” he said.

Pre-owned business maturing

Even before the rebranding, Volkswagen's used car business has shown substantial growth, with sales of close to 30,000 pre-owned vehicles last year, marking a 12% increase. The company operates 137 facilities across India and projects a 10% growth in the coming year. The inclusion of models like the Taigun, which boasts a resale value of 81% after 2.5 years, underscores the strong residual value of Volkswagen vehicles. Gupta notes that approximately 30-35% of Volkswagen's sales come from vehicle exchanges. "That’s the primary reason why we went into this business — to buy used cars and upgrade customers. But what we’ve realised over the years is that as a standalone business also it’s a strong driver,” Gupta said.

Currently, the market is predominantly unorganised, but the organised segment is projected to grow significantly, reaching 45% by FY28. In FY23, 71% of the market was unorganised and 29% was organised. The market's growth is driven by factors such as the rising cost of new cars, easier financing options, shorter ownership periods, and new vehicle scrappage policy.

This feature was first published in Autocar Professional's June 1, 2024 issue.