Pre-owned two wheelers grow faster than new vehicles

Clocks 17.9% CAGR in revenue terms from 2010-2015

Pre-owned two-wheeler sales have beaten the growth rate clocked by the new two-wheeler segment in India in recent times. While the new two-wheeler space had seen some setback thanks to demonetisation as well as the transition from BS III to BS IV emission norms, surprisingly, the used segment has proven to be immune to the same, both in the offline and online segments. Research shows that between 2010-2015 it witnessed a 17.9 per cent growth in revenue terms. 

Sample this: Transactions based online vehicle platform Droom has seen a 112 per cent growth rate in FY17 over the previous year when it came to two-wheeler sales on its platform. Sandeep Aggarwal, founder and CEO of Droom said that compared to just around 10,020 two-wheelers they had sold in FY16, they finished FY17 with 21,300 units. For April 2017, it grew 50 per cent year on year to 2,400 units. In fact, Droom revealed that such is the demand for pre-owned two wheelers that 59 per cent of all queries and online sales comprised two-wheelers (41 per cent bikes and 26 per cent scooters). 

Aggarwal said that of the total 1.2 lakh transactions on its platform in the last two years which is valued at Rs 1800 crore, two wheelers contributed to around Rs 500 crore or so. 

Another online platform Bikewale, a part of Mumbai-based auto portal CarTrade, has seen 100 per cent year on year growth since December 2016, informed Vinay Sanghi, Founder & CEO, Cartrade.com. 

Offline dealers, who are mostly unorganised, too said that they have not seen any demand slowdown since demonetisation. "The demand for used two wheelers has seen a consistent rise in the last two years or so. Models like the Honda Activa, Aviator, TVS Jupiter, Bajaj Pulsar and Discover are evergreen models, always in demand. The availability of easy finance options and more women opting for personal transport are the key drivers behind this growth," informed an Ahmedabad-based dealer of used two wheelers who operates two showrooms in the city. 

In comparison, the 'sharp drop in two wheeler sales volumes in the ensuing months of demonetization resulted in pare back in industry volume growth from 16 per cent during Apr-Oct period to 7 per cent for full year FY17," informed Subrata Ray, Group Head, Corporate Sector Ratings, ICRA Ltd. 

So what are the major triggers behind this sustained growth?

YS Guleria, vice president, sales and marketing, Honda Motorcycle and Scooter India (HMSI) explained, "Our experience shows that the pre-owned industry is evolving very fast. The replacement cycle for 2wheeler has come down from 7-8 years to 3-5 years in a decade. With shrinking replacement cycle of the 2wheeler industry, Honda sees immense future potential in pre-owned two-wheeler retails and we are aggressively scaling up this business. We aim to increase the Best Deal count to 200 outlets by the end of FY 17-18." HMSI had introduced the concept of Certified Pre-owned Outlets-Best Deal some years back, which basically allows the company to create more touch points for interacting with customers and the tap the potential of the pre-owned two wheeler market. 

Honda has rapidly expanded its Best Deal network footprint and is now covering 117 cities across 21 States of India. Honda added 52 per cent of the network in last two financial years itself, Honda has already served over 70,000 pre-owned two-wheeler customers. In terms of pre-owned sales through Best Deal outlets, Honda has achieved a growth of 23 per cent in FY17 

Responding to Business Standard queries, Ken Research Report on India Used Two Wheeler Industry informed, "The used two-wheeler market in India has witnessed unparalleled growth over the period 2010-2015. The market has witnessed an unprecedented compounded annual growth rate (CAGR) of 17.9 per cent during the period 2010-2015 in terms of revenue."

Ken Research attributed the growth of this sector to be driven by rising aspirations of Indian consumers, frequent launches of two-wheelers and availability of easy financing options which have led to a greater supply of pre-owned vehicles in the market.  Additionally, the reduction in the ownership period of two-wheelers has also been an important factor that has driven the used two-wheeler market in the country.

The used two wheeler market which is currently dominated by the offline players including self-appointed dealers, roadside garage mechanics, small brokers and two-wheeler owners among others has been observing a structural shift. Online classifieds and auto portals have been inducing a shift to transactions which are conducted without the involvement of intermediaries.

Pune-based player Bikers Highway was the first player to disrupt the online space. Later in 2014, the market observed the entry of online marketplaces such as Droom and CredR which have revolutionised the used two wheeler markets.