India’s pre-owned car market to be 8.2 Mn units in volume by FY27; OLX – CRISIL Auto Note 6

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. 

The report examines the last 5 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. 

Pre-owned car market to double in size over the next 5 years (FY22 – 27)

Growing at a CAGR of 16%, 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%, reaching 4.8 – 5 mn 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. 

Share of UVs to grow a phenomenal 3X in the pre-owned car segment

In the pre-owned car segment, UVs have increased their share from 17% in FY17 to 22% in FY22. Over the next 5 years, UVs will continue to experience accelerated growth of 3X, reaching a market share of  32% in the pre-owned car market. This segmental shift towards UVs in the pre-owned car market will further help uplift the average price of a pre-owned car, leading to a 2.5X growth in the overall value of the pre-owned car market, over the next 5 years, from Rs. 1.8 trillion in FY22 to Rs. 4.1 trillion in FY27, growing at a CAGR of 19%. 

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. 

Share of small and large cars in the pre-owned car segments and popular brands

Small cars no doubt dominate the pre-owned segment commanding 58% of all cars, with Maruti maintaining its dominance. The share of small cars will contract marginally by 2% to 56% by FY27. The most popular small cars as per OLX platform data considering the average vehicle age of 5 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% share in FY22 to 7% 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

This segment shift to UVs in general will have a domino effect in terms of the age of the cars in the pre-owned segment. The availability of younger vehicles will be much larger and also preferred.  

The share of cars that are in the age bracket of 0 to 7 years, would form nearly58% 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 0-7 age bracket would be 2.2X that of FY22. 

Age of vehicle and price key criteria while buying a pre-owned car 

While metro buyers prefer younger vehicles, price is the primary selection criterion in tier 2/3 cities.

Preference for UV and vans is relatively higher in the East region, while within cars primarily cheaper, lower compact/ basic hatchbacks priced in the Rs 2-3 lakh range are preferred. The average age of vehicles was also higher in the East at  – 6-8 years, compared to other regions.  

Small car/Hatchback prices typically range between Rs 2-4 lakh, sedans around Rs 5-6 lakh and UV prices were relatively higher in the  7-9 lakh range in the preowned market.

Digital platforms to grow 4X by FY27 with huge headroom for further growth
Digital platforms will make massive strides, growing from 3% in FY22 to more than 12% in FY27, an increase of 4X.

Regulatory Environment

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 authorization certificate to identify their authenticity. 

Pre-owned car financing to see a significant thrust 

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

Tier II cities lead in the demand for pre-owned cars

Tier II cities have been the growth engine for demand for pre-owned cars with Tier II  cities making up nearly 40% of the demand, followed by metro cities at 35% and tier III cities and rural, making up for the rest of the 25%.

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