What’s Driving December User-Car Demand? by Naveen Vashisht | AU Small Finance Bank
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What’s driving used car demand in December?

    By Naveen Vashisht, Business Head – Used Car, AU Bank

    When you talk about the dynamics of the used car market, Diwali is passe and it is December that market watchers are actually looking forward to. Typically, used car sales are seen to rise in December compared to November; historic trends indicate that, on an average, one can expect up to 15-20 percent higher sales in the last month of the calendar.
    Lucrative year-end offers combined with good exchange prices allure new car buyers to upgrade their existing vehicles and keep the momentum in the used car market going. More good news, from a business perspective, is that in a Covid-scarred world, the need for personal mobility seems to have come to the forefront like never before.

    Greater customer engagement

    A look at the loan disbursements during the festive months indicates sharp growth recovery. In fact, the pace of recovery in sales is much higher than anticipated earlier.
    This puts all apprehensions at rest and what’s even more heartening is the market scenario after the Diwali euphoria. Unlike the slight slowdown expected after festival season, we continue to see the momentum sustaining and this emboldens us to be hopeful about achieving our budget. Recovery from India’s rural markets has played a major role in the higher degree of improvement in the used car segment. Also, a good product mix has undeniably helped growth projections as well.

    The challenges ahead

    Year-end discounts, upgrade and exchange offers and exchange bonus incentives on existing cars trigger demand prospects for the new car market. It is a complete package that is too inviting for consumers to refuse. But does that mean it is going to be a cakewalk for the used car market in December?
    Well, it can be a bit of a rocky-road in the run up to Christmas and New Year, especially in terms of supply. The higher-than-anticipated demand and many users postponing new buys due to Covid-19 has resulted in a supply bottleneck, especially for sourcing in-demand used cars. But in this case, the solution lies in the problem. 
    Initiatives like 'Loan Mela' and collaboration with organised players has given a fillip to used car loan disbursements. Joint on-ground activities with organised players, for instance, AU Bank's Loan Mela conducted at over 150 Maruti True Value stores in November, can also help bring in larger supplies. Visibility at the ground level spells good news for business and significantly increases the prospects of enquiries converting into actual buys. With all dealers as well as brokers associated with OEMs present at the exchange outlets, it enables easy availability of stock at bulk rate. As a result, this whole process also ensures a proper cycle of inventory falling into place and this could be further expected to rationalise by January-February 2021, at the most end-March.

    Gearing up for 2021

    Setting up the right channels of communication with customers directly is crucial. This will help consolidate and take the business forward. We need comprehensive business focus across a wide range of opportunities. We do have a good pipeline of channel business and that, along with direct sourcing opportunities, is bound to help AU Bank in the near term.
    Even in terms of interest rates, we expect overall rates to come down slightly but, mostly, the financing plan differs from person to person. There are different price strategies for different regions like metro, semi-urban and rural areas. A happy marriage for spread and volume is crucial.
    We are looking at ways to build on the existing business momentum and explore potential opportunities.
    Disclaimer: The opinions expressed in this article do not purport to reflect the views or opinions of AU Bank or its employees.