India’s Second-Hand Car Market Set to Surpass 6 Million Units
India’s used car market is poised to surpass 6 million units in sales this fiscal year, driven by a surge in value-conscious consumers, increased digital adoption, and better access to financing options. A report from Crisil Ratings highlights that the ratio of used to new car sales has risen to 1.4, a significant increase from below 1 five years ago. With used car sales growing at more than double the rate of new car sales, the market is expected to continue its upward trajectory, with projections indicating a growth rate of up to 10% this fiscal year.
Market Dynamics and Growth Trends
The used car market in India has experienced a remarkable transformation, with sales volumes rising significantly. After a modest growth rate of 5% between fiscal years 2017 and 2024, the market saw an impressive 8% increase last year. Crisil anticipates that this growth will accelerate, potentially reaching 10% in the current fiscal year. The total market value of used vehicles is estimated at around Rs 4 lakh crore, nearly matching the value of new car sales. This growth is attributed to a combination of factors, including rising consumer confidence and a shift towards digital platforms for purchasing vehicles.
The report indicates that the average age of used cars is decreasing, currently expected to reach approximately 3.7 years. This trend reflects quicker upgrade cycles and a growing preference for utility vehicles, aligning with the preferences seen in new car sales. Despite the challenges faced by organized players in the sector, such as high operating costs related to refurbishment and logistics, the market is expanding and remains on the path to profitability.
Challenges and Profitability Outlook
While the used car market is thriving, profitability remains a significant challenge for many organized players. High customer acquisition costs, along with expenses related to logistics and refurbishment, continue to impact operating margins, which are often thin or negative. However, Crisil Ratings suggests that the shift towards integrated service offerings—such as vehicle inspection, refurbishment, financing, insurance, and doorstep delivery—could help narrow losses over time.
Anuj Sethi, Senior Director at Crisil Ratings, emphasized that the improvement in the used-to-new car sales ratio signals a structural shift in consumer behavior. He noted that the supply of used cars remains strong, which is essential for sustaining growth. The report also highlights that despite the rapid growth of the sector, organized players are still working towards achieving operational breakeven, with expectations that this could occur within the next 12 to 18 months if current cost management strategies are maintained.
Financing and Market Stability
Access to financing has improved significantly, aided by partnerships between lenders and digital platforms that utilize AI for underwriting. This development has made it easier for consumers to secure loans for used vehicles, further fueling market growth. The pandemic and subsequent global semiconductor shortages have also contributed to a steady demand for pre-owned vehicles, as buyers seek quicker availability compared to new cars.
Crisil’s report indicates that while bank credit remains constrained due to ongoing cash burn, there is potential for a recovery, particularly for businesses with tangible collateral. Most organized players have sufficient cash reserves from previous fundraising efforts, allowing them to meet operational and capital expenditures estimated between Rs 800 crore to Rs 1,000 crore this fiscal year. The focus is now on expanding inspection hubs and enhancing technological infrastructure to support growth.
Future Prospects and Inventory Availability
Looking ahead, the used car market in India is expected to maintain its structural stability, although the availability of quality inventory will be a critical factor to monitor. The report notes that India still lags behind more mature markets, where the used-to-new car sales ratio is significantly higher. For instance, the ratio stands at 2.5 in the United States and 4.0 in the United Kingdom, indicating substantial room for growth in India’s used car sector.
As the market continues to evolve, the combination of rising consumer confidence, improved financing options, and a growing supply of quality used vehicles positions the sector for sustained growth. The ongoing shift towards digital platforms and integrated services is likely to play a pivotal role in shaping the future landscape of India’s used car market.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
