Used car market thrives amid decline in entry-level new car sales, hatchbacks and sedans lead the charge

At a time, when the passenger vehicle segment is witnessing a decline in entry-level car sales, customers are getting lured towards this segment in the used car market.

According to a report by auto-tech platform Cars24, in the April to June quarter of FY24, hatchbacks and sedans accounted for 60 percent and 21 percent in the used car sales, respectively. In comparison to this, SUVs accounted for 19 percent of sales in the used car market.

Analysts believe that price-conscious people or those at the lower end of the pyramid are buying used cars. "People at the lower end of the income spectrum are very mindful of prices. Similarly, in the entry and middle-level car segments, price sensitivity is notable. Some consumers with purchasing power are considering used cars to save money," says an analyst adding that the used car segment has been giving competition across all segments.

Last week, Shailesh Chandra, MD, Tata Motors reportedly raised concerns regarding small cars below Rs 6 lakh facing stiff competition from the used car segment. A used car has a lifeline of 6 to 7 years.

Vinay Sanghi, Chairman, CarTrade--an online auto portal for new cars and used cars-- opines that the used car market will grow 7-8 percent in the next five years. Notably, used cars and used cars account for 15% of the CarTrade's revenue.

"The used car industry has grown at 7-8 percent a year in the past three to four years. We think that this will continue for many years. We'll have continuous growth of seven to 8 percent. India's penetration of cars per 1,000 people is, is one of the lowest in the world. It's still only 50-40 cars per 1,000 people. Extremely low. So, we feel the used car market will grow 7-8 percent for many years. We believe that maybe 7 percent growth in the new car industry for the next four to five years will also stay," says Sanghi.

According to Sanghi, the used car market, at present, used cars account for five and a half million units as against 4.2 million new cars. "We feel very optimistic for the next five years for new cars and used cars," says Sanghi adding that in India as car ownership rates are relatively low, there is a significant desire for both sedans and SUVs across the board in the used car market.

Among technologies, Sanghi observes that there's a notable demand for hybrids, yet availability remains scarce. "Hybrids are in high demand, and electric vehicles are also sought after. However, there's a lag in the supply of these vehicles in the used car market, as most are newer models with only a few years on them. It will take time for more supplies to become available, despite the strong demand," says Sanghi.