India's used-car market to move from complexity to growth

India's used-car market is big and complex, but as it becomes more organised, the remarketing industry on the subcontinent could be poised for major growth, according to a report from Indian Blue Book.

In all, the used-car market in India stands at about 3.3 million vehicles per year. But only a minority of used-car sales originate from businesses, to to consumers, and are processed by organised dealers – around 400,000 units per annum, or about 12%.

Unorganised dealers

Another 500,000 units of B2C used-car sales are processed by 'semi-organised' dealers, and around 1.2 million by 'unorganised' dealers. Together, this adds up to around 2.1 million used cars sold each year by Indian businesses to private consumers. An additional 100,000 units of business-to-business (B2B) used-car sales trickle down to private consumers each year.

On top of that, annual consumer-to-consumer (C2C) sales of used cars in India amount to 1.1 million units. This gives a total sum of more than 3.3 million used cars sold annually – a formidable market, but one that is, according to IBB, “complicated”.

2.8 million units

This is due to the high rate of used vehicles sold through the great variety and lack of organisation of the sales channels. The total volume of cars sold through less-organised dealers and brokers or directly between consumers amounts to 2.8 million units p.a., close to 85% of the total annual used-car market.

But things are about to change, Auto Remarketing magazine quotes Zach Hallowell, general manager of RMS Automotive: “The demand (for used vehicles) is there (…) It’s sourcing vehicles that’s the problem, simply because there aren’t enough vehicles in circulation”.

Handed down

In India, used vehicles are often handed down from one family member to another. That means they don't make it to the wholesale used-vehicle market. But, as India's new-vehicle market grows in size and professionalism, the used-vehicle market is likely to follow – and grow as a result.

Some of the indications that the Indian used-car market is actively modelling itself on more mature used-vehicle markets are the rise of online auctions, the increased use of valuation guides, and the quick growth and acceptance of used-vehicle inspections, says Hallowell.

Beneficial effect

A mature used-car market with strong residual values will have a beneficial effect on the still small Indian vehicle leasing industry, Hallowell adds: “When you have strong residuals, that allows you to lease vehicles”.

According to Hallowell, significant change is five to 10 years down the road – but IBB offers hope of an earlier upturn: according to its predictions, the 'organised' segment of India's used-car market could climb from 12% to 20% in the next year.