Floods sink used car business in Mumbai

The used-car business in the city is yet to pick up after the July rains. On an average, 2,500 to 3,500 used cars were sold in a month in the city. However, the deals have gone down by half after the rains. Though there are sellers, no buyers seem to be keen, say dealers.

Though there is a continued demand for used cars, people are still apprehensive of being saddled with a flood-damaged car. And so are waiting it out till the flood-hit cars are moved out.

Concurs Chandrakant Sanghavi of Sanghavi Auto in Kandivli, "Sellers are coming with cars, but I am asking them to put their vehicles on approval sale as I cannot find any immediate buyers. Since buyers have become sceptical, I first want to figure out whether the vehicle is a flood-hit one or not."

"Moreover, owners whose cars got flooded are looking to buy new cars. They are trying to get rid of their old vehicle by spending Rs 30,000-Rs 40,000 so that they can put it back on the road and sell at a good price. This has added to the concerns of the buyers as it may increase their maintenance cost later," he said.

However, there are instances where sellers are not coming up with their vehicles as they suspect they won't get a good price.

"It is not only that there are no buyers, some sellers are equally hesitant to sell their cars. For a Maruti 800 '94 model, the price is not more than Rs 20,000. Earlier, it would have fetched more than Rs 35,000. So even sellers are waiting for bad cars go off the market," he said.

The cost of maintenance and fuel efficiency are two major factors which determine the cost of a used car. However, the market is dominated by the demand for small cars. Dealers say that small cars make, up to 65-70 per cent of the whole demand.

Another city-based dealer Popular City Cars, however, seems to be bucking the trend. In July, it sold 200 cars which rose to 210 in August. "We thoroughly investigate the vehicle before putting it on sale," said Rana Sethi, managing director, Popular City Cars. "We have also got many flooded cars for sale but they are clearly marked as flooded and are on discount," he said.

Though the market is not doing well this quarter, the dealers are hopeful of a comeback in the coming months.

"We hope that there will be more buyers and demand will increase especially during Navratri," said Sanghavi. Moreover, dealers are of the view that as time passes, the flood fear will also slip down people's mind boosting sales.

Banks too are refusing to slash interest rates on used cars to help the dealers get rid of their mounting inventory.

"Though the whole market is down, there is no plan to slash down interest rates in the used-car business," said Raghuveer Zaveri of Maheshwari Finance, which has a tie-up with ICICI Bank. In Mumbai, 90 per cent of the used cars are financed. "If the banks were to slash rates, that could attract buyers," said a dealer.

Under the hood

There is continued demand for used cars

But people are apprehensive of being saddled with a flood-hit car

Some sellers don't want to sell as they are not sure of fetching a good price

Dealers hopeful of a comeback in the coming months