Excessive demand for standard utility automobiles has created a extreme demand-supply mismatch within the used automobile market, elevating the common promoting worth (ASP) in addition to margins of organised gamers, business executives stated.
In India, for each two new automobiles, three second hand automobiles are offered.
Usually, used automobile platforms and resellers earn a gross margin of seven% in comparison with 4.5-5% of their new automobile counterparts.
Nevertheless, with demand for standard SUVs exceeding provide, used automobile retailers have elevated their common margins on such automobiles by as much as 300 foundation factors in a single yr, business insiders stated. One foundation level is 0.01 share level.
“The demand of SUVs has jumped up considerably in the previous few years and, due to this fact, there’s sure to be a scarcity of SUVs within the used automobile market,” stated Shashank Srivastava, senior govt officer at Maruti Suzuki India.
“Usually, a brand new car proprietor retains the mannequin for 7.3 years earlier than promoting it off. Therefore, the fashions come into the market with a lag,” he defined. “Which means that the present pool of used automobiles availability displays the brand new automobile phase assemble of some years again.”
Maruti True Worth, the nation’s largest retailer of used automobiles by volumes, stated SUVs accounted for 8% of the 260,000 used automobiles it offered between April and October. The SUV share stood at 7% within the year-ago interval.
Different business insiders corroborated the pattern of rising SUV demand.
“Majority of the consumers are asking for SUVs and there aren’t sufficient used ones available in the market,” stated Ashutosh Pandey, MD and CEO of Mahindra First Selection Wheels (MFCW).
The multi-brand used automobile enterprise of Mahindra Group is struggling to fulfill demand. The provision demand mismatch on the agency has widened to 22% from 20% within the year-to-date from the yr in the past interval.
Spinny, a full stack platform for used automobiles, stated its common month-to-month gross sales has elevated to 7,500 automobiles this calendar yr from 4,500 in 2022.
“The demand – significantly for the SUVs – is insanely robust,” stated Neeraj Singh, cofounder of Spinny. He expects the used automobile market to finish 2023 with a 13% progress yr on yr.
The bounce in used automobile demand is in tandem with that for brand spanking new automobiles, which has been on the rise for two-and-half years with October recording the highest-yet month-to-month quantity for passenger automobiles at 391,472 items, rising 16.3% on yr, in line with Society of Indian Vehicle Producers (SIAM).
One cause for the rise in common promoting worth of used automobiles is that the sharp improve in new automobile costs by as much as 40-60% within the final two years (relying on the mannequin and the trim ranges) has inflated the expectations of used automobile sellers, Singh stated.
The ASP on the Tiger World-backed Spinny has jumped to ‘6 lakh from ‘4.6 lakh two years in the past.