Growing demand: SUVs gaining traction in used-car market

After clocking in strong volumes in the new-car market, SUVs (sports utility vehicles) are slowly gaining traction in the pre-owned car market. For Maruti Suzuki’s True Value, the share of SUVs increased marginally from 5-6% over the past year, while for Cars24 the share rose from 10% to17%, and for Spinny it increased from 21 to 29%.In the new-car market, SUVs’ share is close to 38%, while for hatchbacks it is 40%.Kunal Mundra, CEO, Cars24, said the SUV segment in the used-car market reported a five-fold growth last year as affordability drove demand. For sedans, the growth was two-fold, he added.

Big Boy Toyz founder and MD Jatin Ahuja said the share of the SUV segment in the pre-owned car market will grow further in the next five years. The company, which sells only luxury used cars, witnessed a growth of almost 16% in volumes in FY22, with the sales of SUVs being substantially higher than those of sedans.

OLX Autos India CEO Amit Kumar confirmed the demand for SUVs has also been going up. However, given the increasing numbers of first-time buyers in the used car segment, the preference for budget cars in the less than `3 lakh bracket has witnessed a sharp uptick, Kumar said.

Shashank Srivastava, senior executive director, marketing & sales, Maruti Suzuki, told FE that sourcing used cars that had been driven less was a challenge because many owners postponed trading their used car for a new one. “Nonetheless, the ticket price of used cars went up by 14%,” Srivastava said.

Crisil estimates sales of pre-owned car sales at 4.2-4.4 million units in FY22, up from 3.8 million units in FY21. India’s pre-owned car market should cross 7 million vehicles by FY26, a study by Crisil and OLX Autos said. CARS24 estimates the market will be valued at $50 billion by FY25 from $25 billion in FY21.Pushan Sharma, director, Crisil Research, pointed out the smaller replacement cycle from 7-10 years to 4-7 years had driven up demand for used cars. “There are more options today and customers want to upgrade but at the cost of a new car in a low-segment,” Sharma explained. While demand for SUVs grew at 18% in FY18, it was around 20% in Fy21. “The frequent launches of UVs are leading faster replacements and more supply of used UVs,” Sharma said.

Maruti’s Srivastava said sales of used cars in FY22 were predominately driven by an increased preference for personal mobility. This was induced by Covid-19 safety concerns and the impact on income levels with customers preferring used cars to stay within their budgets.

“India’s used car market is logging a higher growth percentage than new cars. The long waiting period for new vehicles and a preference for personal mobility has seen many more people buying used cars,” Niraj Singh, founder and CEO, Spinny, said.

Sandeep Aggarwal, founder & CEO, Droom, said the company has seen a three-fold growth in business in the last few months. “The chip shortage has meant that the supply of new cars is limited. Besides, after Covid, people no longer prefer ride-sharing and public transportation,” he said.