Used cars could see an upswing after BS-VI switch despite sales slump

The slump in automobile sales is mirrored in the used-car segment as well since around half of the buyers of new cars sell their old ones. Buyers who had postponed their purchases in anticipation of the BS-VI norms being implemented from April 1 may now starting selling their old cars.

This means some of these buyers will sell their old cars, says Gajendra Jangid, co-founder, CARS24. On an average, India sells 4 million used cars, against 3 million new ones.

The used cars space is expected to reach 6.7 to 7.2 million cars per year and be valued at Rs 50,000 crore by FY22, according to Indian Blue Book, the pricing and valuation arm of Mahindra First Choice Wheels, the pre-owned unit of M&M.

According to Jangid, BS-VI cars are 5-10 per cent more expensive and, for buyers, nothing has changed because they are not getting any value add even though they are paying more. “Because of this pricing premium, users will buy more used cars. In that sense, used cars become a better deal,” he said.

BS-IV cars can be resold in the market even after March 31, 2020. The used car market has traditionally been stronger than the new car segment. It saw about 5 per cent growth in the organised segment in the first 11 months of the current year, said Shashank Srivastava, executive director, sales and marketing, at Maruti Suzuki. Through its True Value franchise in the used car segment, Maruti has close to a 60 per cent share of the pre-owned car market.

When General Motors and Toyota announced the phase-out of high-selling diesel models like Qualis and Tavera, the demand and prices of these shot up in the used car market. However, there hasn’t been a strong sales pull for diesel models this time.