Indians are now changing their automobiles every five years, on an average, down from 12 years a decade ago, leading to a rapid growth in the used-car market.
Within the next decade, the average ownership of a car is expected to come down to three years.
With the economy growing at a rapid pace, the rising purchasing power of the people, growing aspirations, spate of new model launches and the easy availability of finance have lead to the spurt in the secondary car market. The used-car market in 2010 is estimated to have touched 1.85 million units.
Mr Pankaj Patel, Vice-President – India of BSE-listed Logix Microsystems, a company that owns the used and new car sales Web site
“The growing base of cars in this country has led to a spurt in used-car sales. Nowadays people are keeping cars for five years on average, down from 10-12 years, because many aspire for something better. This market is growing at the same pace as the new car market,” he said.
The entry of many global auto majors in the recent years, such as Volkswagen and Renault-Nissan, has also added to the growth momentum. Awareness of the western standards of living has increased due to better communication technologies, while the high financing penetration of 85 per cent in the country has made sure that many can now afford new vehicles.
“In the US, individuals own a car for three years on average. This should happen in India anytime within the next 5-10 years. At that time the used-car market would grow to 1.4 times the size of the new car market,” he said.
The growth of the auto market and the used-car business in the last few years has also given a boost to an allied industry. Various Web sites that facilitate deals between buyers and sellers have come up recently, such as >Carwale.com , >Cardekho.com and >Cartradeindia.com , while offline models such as Mahindra First Choice have come up across the country. Leading carmakers Maruti Suzuki, Hyundai and Tata Motors have also expanded their used-car business so that they can also get a slice of the pie.
“The Internet is in many homes in urban India now and it is the cheapest way for people to search for used-cars from a large database. It is much too expensive and time consuming to travel to many used-car dealers,” said Mr Patel.
Even the used premium-car segment is expected get a boost, with Mercedes-Benz, Volvo, BMW and Audi expanding their domestic businesses and starting their own used-car arms. For car buffs, this segment may be the most exciting as premium cars depreciate in value by up to 45 per cent in three years.