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SUVs rule the roost even in second-hand car market

 

By Satyanarayan Iyer

PUNE - The premium for sport utility vehicles in the used car market is being driven upward by the extended waiting period for new launches, growing aspirational demand, and shortage of such vehicles in the second-hand car market.

Such is the demand for sport utility vehicles that most on sale in the used car market are quoting at 60-70% of the price of a new one compared to 40-50% for a hatchback or sedan manufactured in the same year and with similar distance covered.

Most Sport Utility Vehicles, Which Cost 1 Mln Rupees And Above, Have A Wait Period Of Six To Nine Months.

The distance covered is one of the key metrics that sways the decision of customers.

Used car sales grew over 15% on year in the Jan-Sep period, with the last two months seeing increased momentum, said market participants.

Shortage of sport utility vehicles in the used car space seems to be one of the key factors driving up their prices. On used car platform, Cars 24, less than a third of all listings are sport utility vehicles and luxury sport utility vehicles as of today. The remaining are hatchbacks and sedans. Similarly, on Spinny, another used car platform, 432 sport utility vehicles were listed across eight cities against 990 hatchbacks and 446 sedans.

Dealers in the unorganised used car market have a similar story to tell. They say that the demand for sport utility vehicles is higher than ever before.

Sport utility vehicles currently represent 40% of new sales for many of the carmakers and the long waiting period, especially those of sought-after brands, are pushing customers towards the second-hand market. Most sport utility vehicles, which cost 1 mln rupees and above, have a wait period of six to nine months.

A waiting period of two to three months is usually considered as normal.

The industry-wide shortage of semiconductors has exacerbated the waiting period, forcing companies like Maruti Suzuki India Ltd and Mahindra & Mahindra Ltd to cut output by 25-60% in September. This has also forced them to align sales with festivals in different parts of the country by routing inventory in batches to certain pockets.

India Ratings and Research expects sales volume of passenger vehicles to fall by as much as 15-18% in 2021-22 (Apr-Mar) owing to chip shortage. On the other hand, industry players expect the used car market to grow by a similar margin.

"The used car market is likely to continue to grow as the factors fueling it continue to hold true. Owing to the pandemic, people are likely to prefer personal mobility over shared mobility, and the semiconductor shortage issue is also likely to continue for some more time," said Abhishek Patodia, senior vice president – used cars, CarTrade Tech Ltd.

In 2020-21, an estimated 3.8 mln used cars were sold in the country with bulk of the sales happening in the unorganised segment. This was against 2.4 mln new cars sold in the same period, data compiled by the Federation of Automotive Dealers Association showed. Currently, 1.5 used cars are being sold for every new car sold in the country.

Analysts expect the used car market to gain further momentum and the pie of organised players to improve to 45% over the next two to three years from about 20% now.

A recent study by Volkswagen India found that used cars are gaining momentum among customers and for every new car sold by 2024-25, more than two used cars will be sold. The study sees the used car market growing to 8.2 mln units by 2024-25 as demand for personal mobility grows.  End

Edited by Maheswaran Parameswaran

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