India’s Used Car Market Headed For 7 Million Units By FY 2026 | AU Small Finance Bank
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India’s used car market headed for 7 million units by FY2026

    Old is the new ‘new’. That clearly looks to be the overriding message in the passenger vehicle industry in India. As per the findings of a new study of the pre-owned car market, this industry is set to cross the 7-million sales milestone by FY2026.

    The fifth OLX Auto used car study, conducted in association with CRISIL, estimates that the sector will clock healthy growth of 15 percent in FY2022 and 12-14 percent CAGR over the next few years, more than doubling market size to over 7 million vehicles by FY2026, from 3.8 million units in FY2021. In contrast, the new car market is expected to grow at 10 percent CAGR.

    With many people preferring socially-distanced personal mobility, during and because of the pandemic, the pre-owned car market is expected to continue to be a sunrise sector. The accelerating trend of digitalisation will also lead to an increasing share of sales through digital classifieds, which will move to 25 percent from 15 percent currently. The share of organised players in the pre-owned market, including digital platform sales, will grow from 20 percent to 30 percent in five years.


    Key growth triggers

    The pandemic, digitalisation, changing demographics and aspirations, first-time buyers, and availability of financing options are driving sustained growth. Digital platforms are gaining traction due to their wide reach, accessibility and ability to provide a variety of options. The share of organised players, including digital platforms, to total industry sales is expected to grow to 30 percent by FY2026, from around 20 percent in FY2021. Additionally, the share of vehicle sales through the digital classifieds segment is expected to increase from 15 percent in FY2021 to 25 percent by FY2026.

    The market has also received a boost from first-time buyers who account for nearly half of all pre-owned cars sold in India. Their share has expanded by 8-10 percent during FY2021.

    Another upcoming trend is that the share of EVs in new car sales is expected to reach 20 percent by FY2031, at which point in time, the share of EVs in pre-owned car sales is expected to be around 5 percent. Given the consistent rise in fuel prices, understandably there was increased traction for cheaper, smaller, fuel-efficient cars.


    Spotlight moving towards UVs

    The study also throws light on emerging trends such as the rise in preference for and the share of UVs. In line with their expanding share in the new car market, the share of used UVs is increasing – up from 18 percent in FY2018 to 20 percent in FY2021.

    Due to speedy new model launches, UVs are also seeing faster replacement cycles. Intermittent model launches and feature-rich competitively priced vehicles will aid the shift towards UVs, whose share will cross one-fourth of the total market by FY2026. The share of UVs is the highest among all regions in the East, at 35 percent of the total market.

    In terms of regional mix, the South lost ground to North dropping to 26 percent from 28 percent, while that of the North increased to 38 percent from 35 percent.

    During FY2021, vehicles aged 5-7 years dominated the market with a 31 percent share, followed by 8-10 year-old vehicles with a 29 percent share. Among large cars, the 8-10 years age-group dominated with a 40 percent share, compared to only 24 percent for 5-7 years.