Used Cars Getting Cheaper, But Not As Much As New Ones: Popular Vehicles’ Naveen Philip On Impact Of GST 2.0 

The Goods and Services Tax (GST) rate reduction on automobiles has had much less of an impact on prices of used cars compared to that for new ones, according to Naveen Philip, Managing Director, Popular Vehicles and Services. “Used cars are getting cheaper but not as much as the new cars. So, there will be at least about a 50% to 60% of the new car dip there,” he told NDTV Profit on Wednesday.

He explained the rationale for this as follows: “Used cars will take some more time in terms of the actual price flowing through to the customer, because it depends on each car, the number of kilometres driven, etc.”

Despite new cars becoming more affordable, Philip does not expect a significant shift away from the used car segment. He cited India's low car penetration rate as a key factor that supports both markets.

“We still have a penetration of only 20 cars per 1000 people or 22 cars per 1000 people. There is a long runway. There is a portion of people who would still buy a used car and that will continue to remain. The increase in that would be far more muted than the increase in the new car sales,” the top executive highlighted.

Philip identified two key "tailwinds" that should propel growth in the coming months: the direct benefit of the GST price cut and the recent reduction in interest rates by the Reserve Bank of India (RBI), which provides a "big boost to the consumer."

Speaking on the initial impact of the GST cut, he said, “In terms of enquiries and bookings, all that has seen a huge uptick. There's a lot more walk-ins into the showrooms because of the GST cut.”

However, he cautioned that it would take over a week to gauge whether this surge in interest translates into sustained retail sales.

“There's a little bit of pent-up conversion also happening. Which is why I said you have to watch till at least Oct. 1, 2 or 3 and then see if this has actually had a huge momentum. There is definitely an increase but what's the rate of increase? We will have to see,” Philip underscored.

Shares of Popular Vehicles and Services closed 1.09% down at Rs 146.50 apiece on the NSE, while the benchmark Nifty50 closed 0.45% lower at 25,056.90.