Despite achieving a historic 27% growth in FY23, with 3.9 million units sold, the new car market is expected to experience a moderated growth pace of 6-8% in FY24.
20 Dec 2023 | 4616 Views | By Autocar Professional Bureau
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According to estimates, the markets for the pre-owned car market stood at Rs 2.10 lakh crore in FY23 with a volume of 4.6 million units at the end of the last financial year. The volume is expected to rise at a compound annual growth rate (CAGR) of 13% and a value by a CAGR of 18%.
Notably, this growth is anticipated to outpace that of the new car market by a substantial margin.
Despite achieving a historic 27% growth in FY23, with 3.9 million units sold, the new car market is expected to experience a moderated growth pace of 6-8% in FY24. Over the long term, a healthy Compound Annual Growth Rate (CAGR) of 5–7% is projected.
Hemal N Thakkar, Senior Practice Leader and Director at Market Intelligence and Analytics said, "The strong growth in both the new and pre-owned car markets signifies a return to normalcy in India's automotive sector post-Covid. Our annual study with OLX captures these dynamic shifts and the move towards digital and organized players, which are accelerating the growth of the pre-owned car market."
The report highlights that the new car segment is witnessing a shift towards premiumisation, with increasing popularity for utility vehicles (UVs) and feature-laden vehicles.
The pre-owned car market is poised for a segmental shift towards premium vehicles, with a particular focus on utility vehicles (UVs). UVs are expected to experience exponential growth, doubling their market share from 21% in 2023 to a projected 41% by 2028. This shift aligns with the broader trend observed in the new car market, where UVs have been steadily gaining popularity, claimed the study.
In the pre-owned car segment, UVs are expected to further expand their market share, driven by the introduction of newer models and compact UVs. Insights from OLX data highlight that popular UV models in the pre-owned car segment include the Hyundai Creta, Maruti Brezza, Ford EcoSport, and Mahindra XUV500. Additionally, emerging models such as the Tata Nexon and Kia Sonet are making their mark. This growing interest in UVs, particularly compact variants, is most prominent in urban markets.
Siddharth Agrawal, Country Head, Marketing, OLX India said the report is an “invaluable resource” for the industry, offering its stakeholders deep insights into market trends and consumer behaviour, and its analysis helps in understanding, "the evolving dynamics of both new and pre-owned car markets, guiding strategic decisions and fostering growth in this rapidly changing sector."
The influx of UVs in the pre-owned car market has a notable impact on the average age of available cars. This shift can be attributed, in part, to the faster replacement cycles observed among UV owners. These individuals tend to upgrade their vehicles more frequently, leading to a higher turnover of UVs in the pre-owned market.
Interestingly, the demand for UVs within specific age brackets is revealing. The highest demand, accounting for 35% of the market, is for UVs aged between 5-7 years. This suggests that buyers are seeking UVs that have had a few years of use but are still in good condition. Following closely behind is the demand for UVs in the 0–4-year age bracket, which makes up 26% of the market. This indicates that there is also a significant market for UVs that are relatively new.
Additionally, the trend of electrification is on the rise, with the sales of new electric vehicles reaching 59,000 units in FY23 and 42,000 units in the first half of FY24. Notably, frontrunners in this space include Mahindra, MG, and Tata Motors. This shift towards sustainable mobility options indicates a broader movement in both the new and pre-owned car markets.
The pre-owned car financing market is projected to grow at a CAGR of 25% from Rs 4,850 crore to Rs 16,000 crore by FY28. An increase in finance penetration and rising vehicle prices will drive this growth.