Demonetisation diminished India’s 3.6 mn unit pre-owned car market by 6 %

Demonetisation diminished India’s 3.6 mn unit pre-owned car market by 6 %

IndianBlueBook (IBB), the industry first pricing and analytics platform for  new and pre-owned vehicles in India, today released the second edition of the ‘India Pre-owned Car Market Report,’ which reviews the impact of recent disruptions like demonetisation and the implantation of GST.

According to the report, the 3.6 million pre-owned car market grew at 9%, though demonetisation had reduced market size by 200,000 units, roughly 6 % of the overall market. The GST regime, as it exists today, imposes a significantly higher burden on the dealer – on a pan-India basis – roughly twice the rate that was otherwise being incurred. Long-term, with transaction transparency increasing, including expected RTO reforms, prices are expected to adjust to accommodate the new tax structure.

According to other findings mentioned in the report, the pre-owned car market continues to organize rapidly; organized and semi-organized segments grew by 36 % and 12 % by volume, while the customer-to-customer (C2C) and unorganized segments have remained flat. The demonetisation ruling and greater access to credit have allowed for increased finance penetration in the organized segment; finance cases have gone up by 20 % post-demonetization. At 70-80 % new car finance penetration, numbers are not too far off those in mature markets; however, at 15 %, significant headroom for pre-owned car financing remains.

‘While these reforms have no doubt disrupted the status quo, they have necessitated that all stakeholders change with the times and become more organized. Notwithstanding the short term hiccups, we strongly believe these market reforms are good for the organized industry in the long term,’ said Dr Nagendra Palle, MD & CEO, Mahindra First Choice Wheels Ltd.

According to the report, the pre-owned car market will be an important enabler for new car industry growth; 25-28 % of all new car transactions are accompanied by a trade-in. While pre-owned car channels are currently highly fragmented (organized, 15 % market share, semi-organized, 36 % market share, unorganized, 17 % and consumer to consumer, 32 % market share), it continues to organize rapidly.