Automobile Jun, 02 2011

First class profits in second hand car franchise

The ever rising cost of new cars and increasing rate of interest on car loans is witnessing a move in consumer preferences from buying new cars to purchasing pre-owned cars. This latest fad has led to the evolution of a pre-owned car industry. Read on to

By Ramanjit Kaur
Feature Writer
First class profits in second hand car franchise

Possessing a car is not a Herculean task anymore. With the emergence of pre-owned car industry it is not at all difficult to own a good car, even if it is second hand. Car has evolved from being a luxury to a necessity today. With increased disposable incomes people are ready to spend on this necessity. Though high cost of brand new cars and sky scraping interest rates on car loans makes the consumers vacillate whether to go for a brand new car or not. Though buying a pre-owned car can prove to be a dicey decision as the market is highly unorganised. However, with the entry of some organised players in the industry and the assurance given by these players about the condition of the cars buying a pre owned car is no more a bad choice. Some of the organised brands in pre owned car market include Mahindra and Maruti. Considering the growing demand for pre owned car players in the industry have opted for the franchise route. Franchising is the best way forward to expand and make available this wonderful opportunity to every nook and corner of the nation. As Jagdish Khattar, Chairman and Managing Director, Carnation Auto says, “We propose to pursue the franchise model, as it will give wider spread to our network and help in building our brand.”This article discusses the franchise opportunity in this emerging industry and the various players of the sector.

Market for pre owned cars in India

The market for pre owned cars in India is dominated by the unorganised players with only 20 per cent is contributed by the organised players. The size of the pre owned car market is estimated to be the same as that of new cars, which are around two million vehicles per annum. The market is speculated to grow at a rate of 20 per cent per annum in the next five years. As per Yatin Chaddha, VP, Mahindra FirstChoice, “The current size of the industry is approximately 2.2 million vehicles per year, that is, the same as the new car market. Owing to the booming economy and rising incomes of people, the pre-owned car industry is expected to grow exponentially.”

With the entry of companies like Mahindra FirstChoice, Popular Car World, Maruti True Value, Carnation and many more, the sector is poised to grow aggressively. Few of these companies (Mahindra FirstChoice and Popular Car World) are successfully exercising the franchise model to expand their presence across the nation while the others (Maruti True Value and Carnation) are focusing on franchising their businesses to spread across the length and breadth of the nation in the near future. As Chaddha says, “Franchising is a good option to enter the booming business of pre-owned cars.”

Entering the pre-owned cars market

Most of the organised players in this domain have ventured into the pre owned car retailing with the mission and vision of providing the consumers with a wide choice, to make it professionally organised by bringing in transparency, quality and trust. Supporting this, Chaddha says, “A customer looking for a pre-owned car was not given a choice of cars, could not be sure of the technical condition of car being shown to him, could not check the background or legality of the previous owner and did not have the benefit of dealing with an organised, national-level player. It was this need-gap which led to the inception of Mahindra FirstChoice.” Whereas Maruti True Value channelises its expertise to ensure the transparency and fairness on its transactions in pre owned cars, which helps in extending its relationship and emotional connect that it enjoys with the customers.

Franchise opportunity

With endeavors of the various players, the sector offers immense growth potential not just for the franchisors but for the entrepreneurs as well who aspires to be a part of this emerging sector. As Chaddha says, “Owing to their knowledge of local conditions, franchisees can greatly help in areas like personal involvement, sales promotion, manpower planning and retention etc.” If you are also weighing your options to enter this promising industry, then franchising is the best option to get yourself started with your own business of pre owned cars. All you need to have is sound financial background in order to afford an investment that ranges from Rs 20 lakh to three crore depending upon the area of the outlet. Mahindra FirstChoice requires an area of 500- 1, 000 sq. ft along with a parking space of 15- 20 cars for its franchise store whereas for its superstores, the company requires an area of 25, 000 – 40, 000 sq.ft with an investment of Rs one to three crore. However, the eligibility criteria for selecting the franchisees differ from company to company.

Franchise benefits

If you fulfill the eligibility criteria of joining hands with a well established brand, you qualify to enjoy a strong training culture and support which is required to run the franchise store as per company designed processes. Being a new franchisee in the network, you will be provided with:

  • Store layout, interiors, furniture etc.
  • Management of the franchise outlet and the dealership staff
  • Understanding demand/ supply situation in second hand cars
  • Car evaluation and procurement process
  • Payment process for cars being procured
  • Car refurbishment process
  • Payment collection for cars being sold
  • Sale agreement with customer
  • Transfer of car documentation and so on.

Every franchisor makes sure that his new franchisee gets to know the working culture of the business before getting started with the franchise business. Thus, great emphases are laid on the skills and knowledge of the franchisees and their staffs. Besides this, the franchisor also keeps them updated with about the newer models of cars that arrive in the market. 

To summarise, the industry for pre owned cars is flourishing big time taking major steps in introducing warranty or certifications on second hand cars. Thus, bringing in credibility and transparency in the highly unorganised market of pre owned cars.

Related: “We are at continuous expansion through dealership” Vaibhav Saraf

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