India’s Pre-owned Car Market Will Reach Rs. 4.4 Trillion In Five Years: OLX-CRISIL Auto Note Six

The Indian pre-owned car market is poised to accelerate and vroom past the new car market, states the 6th annual edition of OLX Autos report in partnership with CRISIL. 

In FY21, Covid-19’s impact was evident in the pre-owned car market, amidst the supply shortage as well as country wide lockdowns. However, in FY22, the pre-owned car market has achieved pre-pandemic levels in volume terms and has grown 9 per cent since. Going forward, in FY23, the industry will pick up pace, backed by a return to near-normalcy and improved consumer sentiment, increase in mobility with the opening of offices and a resurgence in travel, and improved new vehicle supply. 

The annual OLX-CRISIL Auto Note six, examines the last five years of the pre-owned car market from FY17 to FY22 and charts the trends for the next five years - from FY22 to FY27 that will shape the pre-owned car market in India. This study also highlights the region-wise demand trends, emerging consumer preferences, the most popular car models across segments in the pre-owned market, and the rapid growth of financial services in the pre-owned car market. 

“Over the last 6 years, OLX Auto Note has established itself as a leading voice on the pre-owned car market and the emerging trends that will shape its future. This year, emerging from the impact of Covid-19, the pre-owned car market is poised for further acceleration in the coming years. There is a clear preference for pre-owned cars among consumers in larger towns, fuelled by an accelerated shift to digital channels - that offer higher convenience and build consumer trust. Urban markets drive the bulk of the demand for cars in India, With 37 per cent of the Indian population living in urban areas by 2025, we  will see   a sharp rise in disposable incomes and affordability for discretionary spending on personal mobility,” said Amit Kumar, CEO, OLX India.

Growing at a CAGR of 16 per cent, the pre-owned car market is expected to double in size from 4.1 million units in FY22 to 8.2 million units in FY27,  increasing its lead by 1.7X over the new car market. 

Interestingly, during this period, the new car market is also expected to witness healthy growth, and grow at a CAGR of 9-11 per cent, reaching 4.8 - 5 million cars by FY27. Infact, the new car market will record high sales in FY23 backed by improvement in production levels, product launches coupled with continued traction for the UV segment. 

Market share for UVs at 49 per cent surpassed those of both small cars (45 per cent) and sedans (three per cent) combined in FY22. The UV segment has grown from 25 per cent in FY17 to 49 per cent in FY22. During the same period, large (from eight per cent to  three per cent) and small (65 per cent to 45 per cent) have de-grown in annual sales. 

The most popular UVs in the pre-owned car segment as per OLX platform data are Hyundai CRETA, Maruti Brezza, Maruti Ertiga and Mahindra XUV500. The share of small cars will contract marginally by two per cent to 56 per cent by FY27. The most popular small cars as per OLX platform data considering the average vehicle age of five years in the pre-owned segment are Maruti Baleno, Hyundai Elite i20, Renault KWID, Maruti Suzuki Dzire and Hyundai Grand i10.

The large car or sedan pre-owned segment will see the most contraction, declining from 12 per cent share in FY22 to 7 per cent in FY27 owing to the declining sales in the new car market, lack of new model launches and a shift in preference towards UVs. Honda City continues to be India’s favorite sedan in the pre-owned segment. 

The shift towards UVs is  driving down the age of pre-owned cars, and also improving the average buying price in the category

The share of cars that are in the age bracket of zero to seven years, would form nearly 58 per cent of available cars in the pre-owned segment in FY27, adding tremendously to its attractiveness and preference among buyers. Thus in FY27, the number of cars in the zero to seven age bracket would be 2.2X that of FY22. 

Favorable regulatory requirements will help propel the growth of the organized and digital sector. Recently, MoRTH has issued a draft notification setting down guidelines and new regulations for the vehicle resale market whereby dealers would be required to get an authorisation certificate to identify their authenticity. 

“Post pandemic, the Indian automobile sector has shown strong growth both in the new car as well as the pre-owned car market. Increased preference for personal mobility, easing supply-side constraints, increased discretionary and a shift in product mix are contributing towards the sector’s growth. Our yearly study of the market with OLX Autos highlights these dynamic shifts alongside the move to digitally driven and organised players that are further supporting the fast track growth of the used car market”, said Hemal Thakkar, Director, CRISIL Research.

Further, the introduction of BH registrations by the Government,  will simplify interstate vehicle transfer and will enable free transaction of cars across state borders.

The pre-owned car financing market is expected to grow at a CAGR of 25 per cent from Rs. 360 billion to Rs. 1275 billion by FY27. 

Expected premiumisation in vehicles would drive up average vehicle prices and in turn average financing value per car in the pre-owned car market. Finance penetration (pre-owned cars financed out of total pre-owned cars sold) will grow significantly from 25 per cent to 30 per cent in FY22 to 35 per cent to 40 per cent in FY27.