- Mid-level variants are a preferred choice among potential used-car customers
- 72 per cent of current owners indicated that desire to own a car is a dominant purchase driver
Volkswagen India’s pre-owned car business Das WeltAuto (DWA) has worked with Frost & Sullivan to conduct ‘Indian Pre-owned Car Market Study’ to understand and analyse the used-car market in India, customer buying patterns, and opportunities to further develop the market. Frost & Sullivan had deployed the PESTEL analysis approach to cover political, economic, social, technological, environmental, and legal elements that influence used-car buying decisions. The study findings have revealed that organised platforms might contribute 45 per cent to the total pre-owned car market by the financial year 2025 (FY’25). Interestingly, considering the constant growth in sales of pre-owned cars, the ratio of used cars as compared to new cars is expected to increase by 2.1 times that of new car sales in India by FY’25.
The COVID-19 pandemic has changed car buyer’s preferences in the country. Car sales have been undoubtedly affected in past one year, however, 72 per cent of the current owners have indicated that the desire to own a car is the most dominant purchase driver. The Indian Pre-owned Car Market Study further revealed that customers in Tier-1 and Tier-2 are opting for convenient and affordable mobility solutions with financing options. Given that there is a strong demand for used cars, this sector is expected to reach 8.2 million units by FY’25 from the 3.8 million units mark in FY’21.
Key findings in the report are as follows –
Age of vehicle and warranty
The average age of the preferred used-car is 3.5-years as the most recent models offer better features, safety, modern technology, and powertrain as compared to the older models. The study findings reveal that 66 per cent of potential customers prefer a minimum warranty of one year. The organised sector addresses this concern by offering peace of mind with important quality checks and an assured warranty. The primary channel for a used-car purchase is majorly local dealers contributing to 40 per cent, followed by 22 per cent from individual direct sellers.
Finance
Price is the vital factor that is considered by the potential buyers. Around 66 per cent of customers in Tier-1 and 39 per cent of buyers from Tier-2 cities believe that price is the topmost factor considered by the potential used-car buyers. The study reveals that 50 per cent of customers prefer cash transactions, while online payment mode is fast emerging as a preferred payment option with 21 per cent of customers opting for online transactions. Moreover, 17 per cent preferred finance options in the catch-up mode. One of the other reasons why used-cars are gaining popularity is that new cars attract heavy taxes and registration cost. As per the study, used-car finance penetration is expected to touch 35 per cent by 2025 from the existing 21 per cent.
Young buyers
The study findings reveal that 70 per cent of the respondents are in the age group of 30-39 years. A majority of these customers prefer purchasing the mid-spec variant over a base or a top-spec variant. Interestingly, 30 per cent of the customers have bought accessories while purchasing a pre-owned car. Used-car dealers from the organised sector are offering better financing options to differentiate themselves from unorganised players, thereby creating a strong demand for used cars in Tier-2, Tier-3, and rural markets.
Aspirational value
As mentioned earlier, the desire for car ownership is the primary driver for purchasing a used car, whether it’s an upgrade from a two-wheeler to a four-wheeler, old car to new car, or purchase of the first car. The report reveals that 63 per cent of the buyers are interested in owning a car even if shared mobility and public transport is an economical alternative. As many as 66 per cent of the respondents believe that car ownership is largely perceived as a matter of status, while 49 per cent prefer to use a car beyond personal use, and 46 per cent would opt for it due to the flexibility of owning a car.
Commenting on the announcement, Ashish Gupta, Brand Director, Volkswagen Passenger Cars India said, “The study highlights that the market share in the organised sector will touch 45 per cent by FY25 from the current 25 per cent. This is a clear indication of change in consumers’ preference in personal mobility. Used car sales will see further growth as compared to new car sales. With the aim to tap this growing opportunity, we are relentlessly working towards strengthening our offerings for customers through our national pre-owned car network, Das WeltAuto (DWA). In addition, we believe that Tier-2 markets will play a critical role in our used car business volumes and the customer insights from the study will further aid us in addressing their requirements through our customised solutions.”
