Distribution Dynamics in Used Car Market | AU Small Finance Bank
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Distribution dynamics in the used car market

    Naveen Vashisht, President & NBM – Used Wheels, AU Bank
    As demand for used cars keep growing, there is a perceptible shift in consumer preference for organised players and digital platforms. While the CAGR growth expectation of 15-120 percent remains on track, dealers need to work towards ensuring a seamless online experience.

    The distribution dynamics in the used car market is a fast-changing one. We are moving fast towards more of organised channels then unorganised and C2C model.
    • The organised used car segment has now grown to 20 percent from 10 percent in FY2011 and it is fast growing.
    • Semi-organised segment has also seen growth in last few years – from 20 percent to 34 percent. Covid has further fuelled their growth.
    • There has been a major dip in the share of the unorganised sector, down to 15 percent from 30 percent.
    In fact, once the markets opened post-Covid, there have been some distinct changes in the overall distribution aspect in the used car market. Slowly but surely, we see customers shifting from physical to the online model. More and more, we see players working on securing customer trust through self-certification and warranties and work towards consumer convenience like facilitating test drive at their doorstep and offering end-to-end focus starting with information dissemination to financing, warranties, insurance, inspections, price discovery and the entire gamut of offerings.

    Growing reach of digital sales

    In fact, digital is the real story in the overall growth seen in the used car market. Digital consumption is at an all-time high in India and digital sales of used cars are up by a whopping 31 percent and easy availability of information and service quality has aided this.
    The Covid-19 pandemic has accelerated trends in the automotive industry that were already underway but had not been widely adopted. This, coupled with the increased need for personal mobility in the post-Covid world, means dealers are now working towards enhancing the online experience for customers, even in the used car segment. Thus, you see a perceptible rise in footfalls with players like Car Dekho and other e-commerce companies.
    Recent trends indicate that four out of every five people living in India who are considering buying a car said they would use an online purchase option if it were available. Moreover, nearly a third of all potential buyers would buy a car sooner if they had an online option and could avoid visiting a dealership.
    More than 90 percent of car buyers turn to online search. A seamless online experience, including a faster turnaround to their queries is one of their primary expectation. In fact, 56 percent of car buyers now check a dealer’s website while researching for a car, up from 40 percent earlier.
    Today’s auto dealers must provide easily digestible information in varied formats to build a successful online relationship with customers.
    Going forward, I expect enhanced initiative towards digital lending, making the entire process contactless and facilitating seamless integrations with dealers.

    Growth potential in FY2022

    As FY2021 draws to a close, we see that the overall growth rate has been back on track in last couple of months andwe continue to expect CAGR growth of 15-20 percent. The Scrappage Policy details in terms of registration, fitness test, financial incentive, scrapping centres and the like have been announced. This will have its bit of impact on prices of used cars due to the proposed green tax which buyers of used vehicles will have to pay if the vehicle is more than 15 years old. 
    A stringent fitness certification regime could also bring down the usable life of cars, further impacting their resale value