A steep rise in the used car market and the addition of technology by the main players can only mean one thing — a structural change is expected, one that will witness the used car market’s steady and tech-driven growth.

1. Immense opportunity awaits: India’s used car market is picking an exceptional pace thanks to new found profit centres

We’re all witnessing a disruption in India’s used car market. But what is driving this steadfast growth in the used car market?

  • Data monetization, in-vehicle connectivity, subscriptions, rental, charging, and long-term maintenance packages are expected to command a large share in the profit pool.
  • Reduced period of car ownership among the millennial demographic has also been observed, and is a key contributor to the growth in the used car segment.
  • Other factors like the transition from BS-IV to BS-VI, and GST rates differential on purchase of used cars versus that of new cars are some of the growth drivers for increasing used cars.

As far as India’s car market is concerned, this segment is the fifth largest in the world…

2. …But there are inherent challenges: Highly fragmented dealer segmentation and unorganized dealership models are some of the major pitfalls

Although a booming segment, the used car market comes with its own set of considerations. The used car market comprises 30K dealers as of now, making it an extremely fragmented space. Of the existing dealers, close to 45% are commission agents or brokers. Most of them have no physical space of business, and operations are bound to be unorganized. Unorganized dealers have low productivity as they face price led competition from unorganized brokers or C2C transactions.

3. Overcoming these challenges, the digital way

Despite the fact that the used car market has its challenges, digital seems to be doing its part to solve them. Key players are adopting digital best practices and incorporating them effectively in their dealership models. It is estimated that most new car dealerships are now connected online via the OEM online network, and benefit from targeted leads( via OEMs and auto portals). Out of the ~30K used car dealerships, at least 4K are spending consistently on online auto portals.

4. Riding the digital wave, the used car market is a all set to grow at a healthy CAGR of 11%, boasting of sales upto ~8.3 million units, by FY26

For the longest time, new car buyers ruled this segment, however, with the global pandemic in tow, more people are opting for used cars as they prefer personal mobility. This has paved the way for a bright future in the used car market. In fact, our research shows that by FY26, used car sales are expected to grow to ~8.3 million units, at a healthy CAGR of ~11%.

The way forward: India’s used car market is experiencing digital maturity. With the help of transparent, organized, and efficient and tech-driven dealership models, the used car segment can overcome the existing pitfalls. Competitive intelligence, high-quality data, solid user experience, are the need of the hour. All in all, the used car segment is all the rage, and if backed by the best that technology has to offer, it will surely see unprecedented growth.

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  • Mukesh is a go-getter with an analytical approach who enjoys solving challenging business issues. He has worked extensively in the retail, TMT, public policy, and private equity sectors and specialises in research and growth initiatives.

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