Digitisation in Auto Industry – Boost Used Cars Demand | AU Small Finance Bank
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Digitization playing a key role in boosting demand for used cars

    By Naveen Vashisht, National Business Manager Wheels – Used, AU Bank
     
    It’s the start of a new year and a new decade and the expectations from 2021 are huge, especially after a washout year that 2020 was. If the previous year was about Covid, then 2021 is decidedly about resurrection and revival of businesses. This is why we are very hopeful that 2021 will be very exciting for the used car industry. Given the necessities of social distancing, people have started avoiding public transport and looking for cheaper and safer options of travel.
     

    Big players helping rev up demand

    The used-car market is getting more organised because of several big players like Maruti True Value, Mahindra First Choice, Hyundai and Toyota. This has brought more transparency in price and quality / guarantee associated with used cars. This also helps assuage customer concerns about used cars and encourages greater participation from them. In addition, there is the growing reach of used car financing, which currently stands at 20 percent in India as compared to 60-70 percent in developed overseas markets.
     

    Digitisation and disbursements

    Digitisation is also playing a very important role in reviving up demand and boost used car sales. In the current scenario, more than 80 percent of customers undertake their preliminary search online and then visit the dealerships. The ones who embrace this trend and enhance their digital initiatives will benefit in the long run.
     
    We are seeing a huge surge in both used car as well as new car sales. This is also likely to address the supply side bottlenecks in the used car space. Many global surveys and studies suggest that consumer preference is shifting in favour of personal transport after Covid-19. Therefore, we are hoping there is good recovery in 2021 and that used car sales achieve 20-25 percent growth, beating the 15 percent growth of 2020.
     
    In December 2020, there was 5-10 percent growth in used car disbursements compared to the festive months, which is why we are optimistic going forward. Disbursements for used cars are likely to range between INR 1,200-1,300 crore in the first quarter of 2021. The demand is pre-dominantly for hatchbacks followed by sedans in the used car market. The average ticket size for loans may vary, starting from INR 250,000 in core markets and INR 300,000 in urban markets.
     
    Considering all these parameters, we are hopeful that the future is bright. In FY2021, the used car industry in India is expected to grow by 20-25 percent and clock 5-6 million unit sales.