Business services Jan, 06 2010

Pre-Owned Cars Drive Sales

In buying a second-hand car, one has to go through a series of investigations. With the coming up of organised players, pre-owned car companies are all set to provide the best deal to its consumers.

By TFW Bureau
Pre-Owned Cars Drive Sales

With the economic slowdown and sky-scraping interest rates, the country is witnessing a considerable decline in consumer purchasing power followed by a decline of new car sales.  However, consumer preference towards the pre-owned cars segment has grown over the years. This market in India was largely unorganised and organised players shared only 20 per cent of pre-owned car market size whereas in developed countries the organised player controls 70-80 per cent of the market. “Presently, the pre-owned car market size is estimated at 1.5 million in India. The size of the market is in ratio of 1:1 with respect to the new car market in India. Pre-owned car industry is expected to grow at 20 per cent CAGR during next five years,” shares Sharad Agarwal, General Manager-Sales (North), Mahindra First Choice.

Heading towards pre-owned cars segment

In India, the existing pre-owned car market is primarily dominated by the unorganised sector which includes – the roadside garage mechanics, car dealers and small brokers. They do not ensure any authentic certification and the consumers are often deceived. The pre-owned car market has started witnessing a new enthusiasm with Indians picking up used cars from the organised players, which offers car related customised services to serve the rising demands of the consumers.

Companies such as Mahindra First Choice, Popular Car World and Maruti True Value are aggressively focusing on the franchising business route to spread across the country. Besides them, other car manufacturing companies such as General Motors (GM), Hyundai Motors, Ford, Porche, and Carnation Auto have also ventured into the pre-owned car industry to target the maximum share in the market. Seeing this, Volkswagen, a Europeon brand is also expected to venture into this industry.

Customised services

As the trend of selling, purchasing and exchanging of second-hand cars has started picking up in India, the companies are now concentrating more on rendering their manifold services to the consumers through integrated Multi Brand Outlets (MBOs) which incorporates a wide range of brands under one roof. Easy availability of second hand cars of all ranges, lesser interest rates and trouble-free financing and insurance alternatives, warranty period and car accessories are being offered to satisfy the needs of the consumers.  On this, Agarwal elucidates, “At Mahindra First Choice, our value proposition to the customer is to provide him a wide range of choice, as we are a multi-brand player and the cars sold by us are re-conditioned like new and have to pass our stringent 118 quality tests. They are certified by our engineers and we offer up to one year warranty on the cars.” The company is creating Superstores wherein a customer gets a choice of over 100 cars on display at any given point of time and the range varies from a Maruti 800 to a Mercedes.  These are first-of-its kind stores in India in the pre-owned car segment.  Being a pioneer in building both offline and online platforms for sale and purchase of pre-owned cars, Agarwal believes that the online platform will have a major role to play in this business in the near future. On providing the opportunity to entrepreneurs, he adds, “Our multiple store format requires an investment ranging from Rs 30 lakh to 2 crore with space requirement of 2000 sq ft to 30,000 sq ft.” At present, Mahindra First Choice operates six company-owned stores, of which two are superstores and 105 are dealer stores. In next two years, the company plans to appoint 300 dealers and open 27 superstores across India.

Long-term growth

In India, the pre-owned car market is going to emerge as the next sunshine sector in the automobile industry. It is believed that the fragmented sector too has a key role in disseminating the sale and purchase of used cars, not only in metros but in local regions also. As a lot of car manufacturers are today expected to step into this industry, it is assumed that the entry of organised labels in pre-owned car market will open up new revenue channels for their certified dealers and will also attract the consumers towards their branded stores.

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