Demand Dynamics in the Used Car Space By Nikunj Sanghi | AU Small Finance Bank
Gateway to Digital Life. Download AU 0101.

Demand dynamics in the used car space: An industry perspective

    By Mayank Dhingra, Autocar Professional

    The Covid-19 pandemic has made people realise the value of safety for themselves and their loved ones. As a result, with shared mobility and public transport instantly becoming distant options when it comes to ensuring safer personal commute, used cars have emerged the new go-to solutions for people who wish to travel safely and still be prudent to their wallets.
    Pre-owned cars are seeing very high traction, so much so that there is a demand-supply imbalance in the market due to a greater number of people deciding to hold on to their existing vehicles in times of uncertain job scenarios. There is significant demand for entry-level hatchbacks and ample finance options are enabling over 70 percent buyers fulfil their dreams.
    We speak to Nikunj Sanghi, the veteran automobile dealer based out of Alwar, Rajasthan and the managing director of JS4Wheel Motors which deals in both new and used cars and also runs dealerships for Mahindra & Mahindra and Hero MotoCorp.

    How is the used-car segment performing, given the need for personal mobility and are there any operational challenges?

    The used-car space is definitely seeing very good footfalls and inquiries but, unfortunately, what has happened is that a lot of people, who would have decided to trade and make an upgrade, have deferred their decisions. Therefore, more than the demand constraint, there is a huge supply constraint especially on large-volume cars such as entry-level hatchbacks and SUVs. So, while we have inquiries, we do not have enough supplies.
    With dealers having exhausted most of their fast-selling inventories, this is also leading to popular cars fetching good prices for their sellers. 

    Is finance playing a crucial role in enabling consumers fulfil their dreams and what percentage of used-car purchases are being made by availing loans?

    The used-car market is now getting active support from NBFCs, for which this segment is particularly profitable because of the healthy rate of return. These financing institutions are going the extra step in ensuring funding for deserving customers while at the same time staying cautious from the associated risk with candidates with poor credit history.
    More than 70 percent of the used-car space today functions on finance but people who can afford, do make an outright purchase owing to the relatively higher rate of interest compared to that on new cars.

    Are digital channels helping drive sales in the used-car space?

    Most buyers do use some sort of online used-car portal before walking in into an outlet. It only helps that almost all such websites today provide complete details of the vehicle, including their inspection report and images. However, an actual transaction, like in case of new cars, is still being done physically simply because in case of a used vehicle, it becomes even more important to be assured of the documentation and complete the paperwork for ownership transfer, which in some cities, still requires both buyer and seller to be personally present at the RTO.
    Hence, transfer of ownership remains a big issue hampering a seamless used-car retail process. If it were to get integrated into the nationalised Vahan e-portal for digital ownership transfer, it would deliver a huge boost to the business.

    How is the trend unfolding regarding demand for used diesel vehicles in the second-hand market?

    As of now, used diesel cars have taken a price hike because of non-availability of these vehicles in the market. While demand is definitely shifting towards petrol, diesels are still the mainstream vehicles especially in rural areas due to their almost 20-22 percent higher fuel efficiency.
    Disclaimer: The opinions expressed in this article do not purport to reflect the views or opinions of AU Bank or its employees.