Mahindras bet big on used car business

Automartindia, the used car business of Mahindra & Mahindra, has opened its first superstore in Mumbai. The three-way joint venture between the M&M group (which holds 75 percent), HDFC and Sah & Sanghi has also rechristened itself FirstChoice. The size of the used car market is estimated to be between 1.1 and 1.3 million vehicles at a value of Rs 20 crore. It is growing 15 percent annually and is expected to touch 15 million vehicles in the next three years.

The organised sector accounts for a mere ten percent of the market with other players being Maruti True Value, Honda Auto Terrace, Hyundai Advantage and Ford Assured. More plan to enter this space soon. Unlike the unorganised sector, FirstChoice will provide refurbished used cars certified through a 118-point check system with a warranty programme. Customers will be assured of a quick transfer of ownership documents unlike the situation in the unorganised sector.

“Formed in the late 90’s when a slew of cars were launched, FirstChoice had the first mover advantage as the only organised used car mart which is poised to grow in the coming years,” vice-chairman and managing director, M&M, Anand Mahindra told reporters at the launch of the FirstChoice superstore.

FirstChoice has a network of 80 outlets across 54 cities. Only eight of these are company-owned while the rest are franchisees. It plans to expand this network to 200 outlets over the next 2-3 years. Located in Goregaon, a Mumbai suburb, the FirstChoice superstore spreads across 40,000 square feet and can hold 150 cars in all shapes and sizes.

This outlet is the first-of-its-kind in India and designed as a one-stop shop for customers. It also houses 10 repair bays, procurement bay, accessory store and café and entertainment areas for kids. “FirstChoice will aim to offer services that can be benchmarked in the Indian used car market. We plan to open six such outlets throughout India in the next 18 months,” said CEO, FirstChoice, Vinay Sanghi.

These will be opened in Bangalore, Delhi, Pune, Chennai and Hyderabad and will cost about Rs 10 crore each to set up. All these superstores will be company-owned. Automartindia sold 8,000 vehicles last year, and FirstChoice has a target to sell 12-13,000 cars this year. The company aims to retail 25,000 used cars a year by 2009.