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How tech-driven startups are disrupting the pre-owned car market India's pre-owned car market is booming and tech-driven startups are riding the wave

By Priya Kapoor

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Entrepreneur

When 30-year-old Vishal Gupta de­cided to buy an SUV, he went in for a pre-owned one instead of a new one. "I always wished to have an SUV. But when I started scouting for the one, I found it had a waiting period of 13 months. I had no issues with ownig a pre-owned one. Luckily, I got the one at a great price," says Gupta. Vishal is one of the many youngsters who don't mind preferring a pre-owned car to a new one.

Between 2016 and 2020, the sale of pre-owned cars wit­nessed a continuous increase before falling a bit in 2021 on account of Covid-19. In 2020, 4.2 million used cars were sold across India, compared to 4 million and 3.8 million in 2019 and 2018, respectively. This was 50 per cent higher than the new-car sales figure at 2.8 million. The forecast of future growth of sales of pre-owned cars is bright. Accord­ing to Redseer management consultancy firm, by FY 26, the pre-owned car sales are expected to reach 8.3 million units, at a healthy CAGR of 11%.

There have been several factors that have fuelled the growth of pre-owned car market, including lowering of the vehicle replacement cycle from 6 years to 4 years, increasing penetration of used car financing, the semicon­ductor chip shortages for new cars, and an underpenetrated passenger vehicle market.

Various regulatory changes such as BS – VI emission norms (which have made new cars expensive due to additional technology costs), scrappage policies and revi­sion of the GST rate on used cars from 28% to 12-18% have also driven the growth of pre-owned cars. Further, there has also been a shift in the mindset of consumers who now no longer associ­ate owning a pre-owned car with the downsized social status. Instead, they think it is a smarter investment over buying a new car.

TECH-ENABLED STARTUPS RIDING THE WAVE

The boom in the pre-owned market is being encashed by many new-age tech driven startups, who have entered the space in the last few years. These include players like Spinny, droom, Cardekho, CARS24, CarTrade, CarTrade Tech and people-to-people platforms such as OLX and Quikr. "The used car market has largerly been a highly fragmented market for decades, plagued by inefficieinces and stan­dardization gaps across the board. The entry of orga­nized players like us has led to incrased confidence amongst consumers," says Gajendra Jangid, Co-found­er & CMO, CARS24.

These startups are tak­ing phygital approach–on­line services coupled with physical pan-India hubs in order to make the buying journey of used cars right from search to payment, completely transparent and hassle-free. From multiple point inspection checks to in-house refurbishing to finance and buyback op­tions to doorstep delivery and instant payment, these startups are making sure that the buyer and seller get the best experience.

Niraj Singh, founder and CEO, Spin­ny who is looking to expand the presence to over 30 cities by end of 2022, says:

Our Spinny Assured® car is serviced dry-cleaned and waxed and can be home-delivered in 22 cities across the country. We offer a 5-day money back guarantee, one-year free warranty on every car. With customers getting great prices and a hassle-free selling experience for their existing car, there is also a trend of upgrading/exchanging with a better used car

On the other hand, CARS24, which has expanded its horizon in the UAE, Thailand and Australia, claims to be the first player in the pre-owned vehicle industry to procure a non-banking financial company (NBFC) licence and launch a consumer lending business with CARS24 Finan­cial Services. "In this pursuit, we have also partnered with multiple institutions such as Kotak General Insurance , Poonawala Fincorp, and Bajaj Finance Lt. We are one-stop solution for anything and ev­erything to do with used cars. We have also set up state-of-the-art Mega Refurbishment Labs," adds Jangid.

OPTIMISTIC POST PANDEMIC TOO

What's interesting is that, these startups are optimistic about the growth of used cars post pandemic too, "The pan­demic has drastically changed the perspective of customers. In fact, we have witnessed an increase of 44% in online pur­chases in the second quarter of 2022. Further, customers have realized that used cars are significantly more afford­able than new cars, consider­ing higher taxes, registration, and other costs," says Singh.

Agrees Jangid, "The pandemic led to an evident behavioural shift among consumers. Today's progres­sive consumer realises the benefits of purchasing a used car online; affordability being the biggest driver, followed by availability of high quality cars and easy finance options, that were not present earlier.

INVESTORS BULLISH

Investors are super bullish about the pre-owned car market and have been pouring in millions in these startups. In fact, as many as three startups-Droom, CarDekho and Spinny entered into the Unicorn club in 2021 on the back of huge funding made by the investors. After raising funds in 2021, the valuation of CARS24 reached $3.3 billion from $1.84 billion.

Says Aprit Agarwal, Director, Investment, Blume Ventures, who has invested in Spinny:

We realized that the trust and transparency which is there in buying a new car was missing in case of used cars. This led us to believe that the scope of the used car business is huge if a used car too comes with the same trust and transparency. However, back then, it was difficult for venture capitalists to believe in the business model of mar­ketplaces like Spinny, but glad we did. The improvement in road conditions and changing consumer preferences from owning a car for 6 to 7 years to just 2-3 years makes us bullish about the used car market in the country."

CORPORATES GEARING UP

Maruti, which has been in the pre-owned market space since 2001, is ready to up its game. According to it, the new-age digital aggregators have a disproportionately high mind­share (brand recall) in the pre-owned car market compared to their marketshare.

This is a crucial area of concern. And, to gain mindshare in a segment where digital plays a big role, we have to leverage and promote our own state-of-the-art digital tools such as the all-new pricing engine and the revamped evaluator app," says Shashank Srivastava, Senior ED, Marketing and Sales.

"We retailed 83,255 pre-owned cars in Q1 2022-23, a growth of 76%. The True Value Certified car sales grew even higher at 155% (at 20,433 units), adds Srivastava.

Priya Kapoor

Entrepreneur Staff

Former Feature Editor

Priya holds more than a decade of experience in journalism. She has worked on various beats and was chosen as a Road Safety Fellow in 2018, wherein she produced many in-depth & insightful features on road crashes in India. She writes on startups, personal finance and Web3. Outside of work, she likes gardening, driving and reading. 

 

 

 

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