Amid the Covid-19 pandemic, which has led to a surge in demand in the used cars sector — the cars have become a mainstream option, with customers desirous of buying a vehicle actively looking for both new and used cars before finalising the purchase decision, said Ashutosh Pandey, MD and CEO, Mahindra First Choice Wheels, the pre-owned car vertical of M&M.
In an email interview with BusinessLine, Pandey detailed the trends that have emerged in the used cars sector due to the pandemic, comparisons with the new car market, and his outlook for the sector. Excerpts:
1. Amid the pandemic, what are the new changes you have noticed in the used vehicles market?
There are three noticeable trends in the used vehicle market currently, all of which have accelerated due to the pandemic. First, digitisation. All participants of the ecosystem – dealers, brokers, FIs, customers – have adopted a digital approach to inspecting, buying and selling of cars. Second, formalisation — customers have shifted to formal channels that assure them objective evaluation, fair pricing and services (such as warranty), moving away from brokers and garage owners. Finally, mainstreaming. Customers desirous of buying a vehicle during the pandemic are actively looking for both new and used cars before finalising the purchase decision.
2. How have the demand and sales been in this market ever since the pandemic started? How has it changed from the pre-pandemic time?
The demand for used cars has certainly increased from pre-pandemic times. On our website carandbike.com (India’s No.2 auto website), average number of leads and views of used cars now are 1.4x higher than before the pandemic. However, due to supply constraints and unpredictable nature of the lockdown, sales were impacted during the first few months. However, by August, the sales have reverted to pre-pandemic levels.
3. How is the used vehicles market doing vis-a-vis the new vehicles market?
The market has come back to near normal levels since August.
4. What were the challenges faced during the pandemic?
There have been two major challenges. First, the used vehicle market is facing supply constraints due to 3 factors: (a) customers are holding on to their used vehicles and not selling them as they were doing before the pandemic, (b) exchanges have been impacted due to continued challenges in the new car market, (c) repossessions have virtually stopped since April due to ongoing loan moratorium.
Second, the unpredictable nature of lockdown and its stop-start nature has impacted walk-ins to the stores, despite robust demand from customers.
5. Due to the supply/demand mismatch in the sector, has the price increased for the cars in recent times? If yes, would it be possible to quantify it for the industry?
The price has increased for select popular models by 2-3 per cent. However, this isn’t an all-India trend as yet. Should the supply-demand mismatch continue, we can expect prices to firm up in the coming months.
6. Earlier, the used vehicles market was growing, while the new vehicles market was undergoing a prolonged slowdown. How has the situation changed now? What is your demand outlook for the used vehicles sector, going forward?
During FY21, the used car market is likely to be in the 3.5-3.7 million range. This will be lower than 4.2 million used cars sold during FY20. However, after factoring in the impact of lockdown during April-June, the used car market during rest of FY21 (Jul-Mar) is likely to grow by 5-7 per cent.
7. When do you expect the supply constraints facing the used car market to ease?
We expect the supply situation to get to near normal in the coming months as repossessions start after the moratorium and new car sales pick up.
8. The used cars market has outperformed the new car sales in the last two years. Will the trend continue this year as well?
I think the used car sales will continue to be strong for the rest of the year as well.