Indian pre-owned car market to cross 7 mn units by FY26: OLX Autos-CRISIL Study

OLX Autos announced the 5th edition of its Auto report – one of a kind study on the pre-owned car market in association with CRISIL – that estimates the size of the pre-owned car market in India and examines key trends and attitudes towards the sector. A comprehensive report on India’s pre-owned car industry, the study combines OLX Autos’ vast and extensive data, along with CRISIL’s known edge in research and insights to arrive at decisive trends that are shaping the sector.

According to the ‘OLX Autos-CRISIL Study 2021’, the pre-owned market has been outpacing the new car market, and the industry is expected to clock a healthy growth rate of 15% in FY22. As per the study, the prospects continue to be bright on the longer horizon, with a 12-14% CAGR expected over the next few years, taking the size of the market to more than 7 million vehicles by FY26, from 3.8 million units in FY21. In contrast, the new car market is expected to grow at a tepid 10% CAGR. With many people preferring socially-distanced personal mobility, during and because of the pandemic, the pre-owned car market is expected to continue to be a sunrise sector. In addition, the accelerating trend of digitalisation will lead to an increasing share of sales through digital classifieds, which will move to 25% from 15% currently. The share of organised players in the pre-owned market, including digital platform sales, will also see a 10% increase, from 20% currently to 30% in five years.

“The OLX Autos CRISIL Study brings in breakthrough insights into the pre-owned car segment. The preference for personal mobility has propelled a huge swing in favour of used-car sales that are expected to reach a phenomenal 1.5x more than that of new car sales over the next five years. The digital switch has been highly transformative, bringing in its wake increased transparency, trust and a huge choice of new generation vehicles to the consumer. The unique customer insights from the study will introduce further innovation in the sector. In order to keep pushing the ball up, to give enhanced comfort and safety to our customers, we are accelerating product development, and have pioneered home and self-inspection services. The new levels of innovation introduce a fresh dose of optimism in the sector,” said Amit Kumar, CEO, OLX Autos India.

Sapna Arora, CMO, OLX India, added here, “The study is a definitive commentary on the pre-owned car segment. OLX CRISIL Auto Study is a deep dive into the pre-owned car segment giving qualitative insights on changing matrix in the post-pandemic ecosystem, highlighting the key growth triggers, market-wise segmentation, post COVID consumer behaviour, evolving trends in this landscape, and much more. As a continuous effort annually, this year we partnered with research analyst CRISIL to understand the diverse customer insights and penetrating market trends across the country in elevating the efforts to know the market better, changing customer preferences and evolving customer needs.”

Tailwinds for the Sector | Key Growth Triggers

The pandemic, digitalisation, changing demographics and aspirations, first-time buyers, and availability of financing options are driving sustained growth in the pre-owned car segment.

Digital platforms are gaining traction due to their wide reach, accessibility and ability to provide a variety of options. The share of organised players, including digital platforms, to total industry sales is expected to grow to 30% by FY26, from around 20% in FY21. Additionally, the share of vehicle sales through the digital classifieds segment is expected to increase from 15% in FY21 to 25% by FY26.

Apart from the digital push, the market has received a boost from first-time buyers who account for nearly half of all pre-owned cars sold in India. The share of first-time buyers expanded by 8-10% during FY21 in the backdrop of the pandemic, primarily due to restricted availability of public transport, and increased need for personal mobility. Increasing urbanization and nuclearization are expected to provide further impetus to the need for personal mobility, thereby accelerating the demand for pre-owned cars.

Another upcoming trend is that the share of EVs in new car sales is expected to reach 20% by FY31, at which point in time, the share of EVs in pre-owned car sales is expected to be around 5%.

The outbreak of COVID-19 and the subsequent shutdowns have affected the market in both ways, wherein the first half of 2020, the sales were impacted by the lockdowns, but the market witnessed huge growth in the latter part of the year.

The Reset After The Pandemic

The study outlined the impact of the pandemic on market and consumer behaviour. With the emergence of OLA & Uber, many customers had deferred purchasing personal vehicles, especially in metro cities. However, the pandemic brought the interest back on the need for owning personal vehicles, and this trend is unlikely to abate in the near term.

During the first wave of the pandemic, supply crunch and increased demand impacted stock levels across regions, mainly in the South and West where inventory levels came down to 30-35 days, from the typical 45-50 days. Supply levels are slowly normalising in 2021, with improved mobility, lesser restrictions, and lower reluctance to sell vehicles. As new car vehicle supply improves, pre-owned car supply is also increasing. Unlike other regions, the North was relatively shielded from the supply crunch, and was able to maintain near-steady inventory levels throughout the pandemic.

Compared to pre-COVID levels, the demand shot up 20-30% after the unlocking in CY2020. Demand improvement was more pronounced in the South, followed by the West, while demand growth was relatively lower in the East post lockdown. The pandemic also witnessed a sudden increased traction for cheaper, smaller, fuel-efficient cars.

Spotlight moves to UVs

The study also throws light on emerging trends in mobility, such as the rise in preference for and the share of UVs in the pre-owned car market. In line with their expanding share in the new car market, share of UVs is increasing in the pre-owned car space, up from 18% in FY18 to 20% in FY21. Due to the intermittent launches, UVs are also seeing faster replacement cycles. Intermittent model launches and feature-rich competitively priced vehicles will aid the shift towards UVs in the pre-owned car space, whose share will cross 1/4th of the total market by FY26. The share of UVs is the highest among all regions in the East, at 35% of the total market.

In terms of regional mix, South lost ground to North vis-a-vis share of total sales of pre-owned cars. The share of the South dropped to 26% from 28%, while that of the North increased to 38% from 35%.

During FY21, vehicles aged 5-7 years dominated the market with 31% share, followed by vehicles aged 8-10 years with a 29% share. Among large cars, the 8-10 years age-group dominated with a 40% share, compared to only 24% for 5-7 years.

OLX Autos combines online trading platforms with offline car inspections to offer consumers the ‘next generation’ in second-hand car buying and selling.