Owning a car is a dream for many, and if it is a luxury car? The demand gradually increases, with the sellers having a field day.
The Indian buyer is synonymous with aspiration and car buyers are no different. Everyone wants to be seen with glitzy wheels, which is being made possible with used cars. This has resulted in a thriving pre-owned luxury car market in India, which is speeding its way to becoming the fastest growing segment of the overall used car space. Industry experts say while sales volumes in the used car market are growing at a CAGR of 18-20%, the used luxury car segment is growing faster, at 22-24%. Contrast this with the 7.7% growth seen in the new passenger vehicle segment during the April to October period in 2017, and it drives home the shift. Sales of used luxury cars in India are clocking 30,000-35,000 units a year now, equalling sales of new luxury cars at around 35,000 units. While sales of used luxury cars in India today are on a par with new luxury cars, in mature markets, pre-owned luxury cars outsell new luxury cars 2.2 times. This has made players in the industry optimistic of further growth in the used luxury car segment in India.
They see the price differential as a key driver of this growth. Big Boy Toyz, a company that deals in multi-brand used luxury cars in India, claims to sell some models at as low as 50% of the price of the new car. Jatin Ahuja, founder, and managing director, Big Boy Toyz (BBT), says volumes for the company have grown by 40% in the previous financial year. He adds, “Three to four years back, pre-owned luxury car sales were about 50% of the new luxury car sales. But today, used luxury car volumes in the country are on a par with the brand new ones.” A vast number of purchases in this segment come from petrolheads, read car enthusiasts, who love trying out different brands of cars and don’t like settling with one. Ahuja says around 75% of BBT’s buyers are passionate drivers, who love the experience of driving high-end cars. He adds that tier-2 cities are opening up to the concept of buying second-hand luxury cars, which has helped sales.
Vikram Pawah, president, BMW Group India, which launched the BMW Premium Selection, the company’s pre-owned cars business in 2011, says most buyers are from tier-1 and tier-2 cities, adding, “With the rise in disposable income, they are not hesitant to spend on luxury products and services. Luxury for them is an indulgence and they want to associate with top brands to make a statement or simply to reward themselves for their achievements. They are new to the world of luxury and represent an untapped market potential for pre-owned premium cars.” Currently, due to the high ticket size of luxury cars, most of the market is organized. Rajat Sahni, CEO (used cars) at Car Dekho, says the organized segment share has around 65% market share, with the remaining being customer-to-customer. With a majority of luxury car OEMs coming up with their own certified pre-owned programmes, the pie is only going to get bigger, adds Sahni.
While the used car sales are growing, analysts say the high amount of discounting in the new luxury car market may pose a major challenge for the players. The discounting, as per analysts, is because of the rising competition in the country’s luxury car space. Many new OEMs have joined India’s luxury car race. While Volvo set up shop early this year, Lexus is mulling setting up an assembly plant in India. But pre-owned luxury car sellers remain unfazed. Their take is that the new luxury cars sold today will only add to their own portfolio in two-three years’ time. Sahni claims optimistically, “In two years, I feel that the used luxury car market is going to grow to 1.5 times the new premium car sales in India.”
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