Used Car Market To Double In Next Five Years, Says OLX

India's pre-owned car market will double in volume to 8.2 million units in the next five years, significantly outpacing the new car market, Amit Kumar, the CEO of OLX Group India, told BQ Prime.

“This is going to be led by a robust growth in GDP, steady expansion of the new car market, and higher penetration of financing in the used car market,” Kumar told BQ Prime, citing a report published by OLX Autos with ratings agency Crisil.

The sixth annual report charting the trends in the used car market pegged the pre-owned car market to grow at a compounded annual rate of 16% over the next five years, compared with a 9–11% growth in the new car market.

While the volumes will double, the market size will jump to Rs 4.1 lakh crore in FY27 from Rs 1.8 lakh crore in FY22.

After the pandemic struck, the shortage of semiconductors limited the production of new cars, leading to a supply crunch in the used car market as well.

As a result, used cars became more expensive by as much as 15% in some cases. Gupta said the situation is improving now with used car supply reaching pre-Covid levels.

“The situation is moderating now; the new car supply is becoming more predictable, at least in India,” he said. “We expect the used car prices to come down to pre-Covid levels.”

Shifting Preferences

During the same period, the share of utility vehicles is expected to grow at the expense of hatchbacks and sedans as the demand trends observed in the new car space reflect the pre-owned car market with a lag.

The rise in sales of utility vehicles will outpace even the overall market, growing three times in the next five years, according to the report. The share of UVs in the used car market will rise to 32% in FY27 from 22% in FY22.

However, smaller cars or hatchbacks will continue to dominate the market with an estimated 56% market share, contracting by just 2% from the current levels.

On the other hand, the sedan segment will see a sharper reduction to 7% from the 12% market share.

The rise in the share of UVs will bring down the average age of the cars on the market as those customers tend to replace their cars sooner, the report said.

Ease Of Access

The ease of buying an old car will also rise as the penetration of financing is pegged to grow to 35–40% from 24–30% at present.

A favourable regulatory environment is also likely to help, as the government has already issued draft guidelines to streamline the dealer network for used cars.

“The share of digital players is just 5% in the market and is expected to grow three times to 15% in the period,” Kumar said.

The pilot of "Bharat Series," or BH registration, which may allow free inter-state movement of cars when implemented, holds potential to unite the entire country as a single market, he said.

Watch the full interview here: