Maruti's used car biz sells 422,000 vehicles in FY16

Highest in 5 years; grew 11.6% over 2014-15; a third of the company's cars sold in exchange offers

One in three new cars Maruti Suzuki sells is through the exchange of an old one. The country's largest car maker's used car business is growing at a rate identical to new car sales.

True Value, the used car business of Maruti Suzuki, sold 422,000 cars in 2015-16, growing 11.6 per cent over the previous year. Maruti Suzuki's new car sales in the domestic market, too, grew 11.5 per cent in 2015-16. The company has 1,046 True Value outlets, 179 of which were added last year.

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The volume of used cars handled by True Value is the largest by any organised network in the country. Cars are refurbished and sold with a six-month warranty. Though it does not contribute directly to Maruti Suzuki's revenue, the business is instrumental in supporting sales of new cars.

"Customers for pre-owned cars want assurance and quality, besides affordability. True Value delivers that, and hence is very successful. For us, it expands the base of customers and also promotes new car sales," said RS Kalsi, executive director (marketing and sales) Maruti Suzuki.

"We are looking to take the True Value network to 1,800 outlets in a few years," he added.

Apart from a huge underserved market, used car demand is being propped up by low interest rates. The gap between interest rates for financing new and used cars is down from five-six per cent a couple of years ago to two per cent now.

The presence of organised players like Maruti and Mahindra has increased lenders' confidence in the used car segment. In 2015-16, the organised used car market is estimated to have touched 1 million cars, up from 450,000 in 2012-13. Top selling used cars are Maruti Suzuki's Swift and Alto and Hyundai's Santro.

"Shorter holding periods, a rising mass of aspiring buyers, greater participation of organised original equipment manufacturers, accessibility of finance, and availability of certified and refurbished cars are fuelling growth in the used car space," said Ajay Srinivasan, director, CRISIL Research, in a report last month. According to CRISIL, for every 10 new cars sold, 22 used cars are now finding buyers. Although the ratio of sales of used cars to new cars in India has risen over the years, it is still lower than the three-to-one norm in the US and Europe.