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Latest Indian Blue Book forecasts 10-25 percent growth in used cars

    By Sumana Sarkar, Autocar Professional
    Covid-19 and digitisation the key drivers of used car sales; hatchbacks see robust demand in FY2021; it could be the turn of SUVs in FY2022.
    The pre-owned car market in India has continued to grow, despite slowing economic activity and externalities which have shaken the auto industry in the past year. This is according to the Indian Blue Book pre-owned car market report FY2021, which offers an insight into the evolving pre-owned car market. Covid-19, the need for social distancing and also the increased pace of digitisation in the current scenario have been the key drivers for growth in FY2021.
    The report states that 4.2 million passenger cars were sold in FY2020, a modest growth of 5 percent over the previous year. The gap between the size of the pre-owned car market and the new car market of pre-owned cars has doubled between FY2019 and FY2020. Based on recent estimates, the used car industry volume is pegged at 3.9 million units.

    Impact of Covid-19 on industry

    With the lockdown in the first half of FY2021 to contain the spread of Covid-19, the new car industry is estimated to have registered a sales decline of 36 percent (YoY). In comparison, in the same period, the pre-owned car industry is estimated to have shrunk by only 7.1 percent.
    Tier2 and Tier3 cities have become critical in terms of driving volumes in the pre-owned car market. The percentage contribution of the non-metro areas to the total volumes has increased by 20 percent between FY2017 and FY2020. The biggest share of sales is from the north and south zone, with 29 percent sales each as of FY2020, thereby contributing to 58 percent of the total volume sold. The east zone is the smallest contributor at 17 percent.
    Some findings of the surveys conducted by the Indian Blue Book at an all-India level are:
    • The pandemic has pushed a lot of non-car owners to shift to a used car by way of entry-level hatchbacks, hence 3 out of 4 dealers (75%) have seen the demand for hatchbacks grow significantly. The next spurt in demand is seen for the SUV segment.
    • 87% of the dealers believe that the industry will continue to grow in the future, with an expected growth of 10-25% in the near future (with reference to volume of used car).
    Moreover, as a direct outcome of the social distancing norms, the role of digital platform is rising. Almost 64 percent of the pre-owned car buyers searched online for car-related information. A total of 65 percent buyers were influenced by Covid-19 to buy a vehicle. In fact, 29 percent of the used-car buyers were not at all considering buying a car before Covid-19 struck.
    However, as the second wave of the pandemic continues to affect the rural and urban areas across the country, the way demand pans out in FY2022 is going to be interesting. Initial trends seem to indicate that the pre-owned car demand is fairly strong at the moment.