Faced with rising car prices and high interest rates on automobile loans, and amid the ongoing slowdown and consequent uncertainty in the economy, more and more car-buyers are postponing new vehicle buys and settling for pre-owned cars instead. This is happening not only in the smaller cities but also in new car markets in metros such as Bangalore, Chennai and Pune.
“The entire industry is going through a tough time. For urgent needs, consumers are looking at the second-hand market as they are holding back on overall economy because interest rates are still high, cash-flow is slow and banks are not opening up,” Abdul Majeed, Partner and head of auto practice at PricewaterhouseCoopers India, said.
He said therefore, there is still negative sentiment in the brand new car sales market.
“It is not that people do not want to buy brand new cars. It’s just that they want to hold off the purchase for some time till the market opens up,” he added.
Companies that sell pre-owned cars also believe there is pressure in new car volume growth and can see the number of second-hand cars growing.
“In the current market situation, new car volume growth is under pressure from high interest rates and inflation,” Rakesh Srivastava, Vice-President, Sales and Marketing, Hyundai Motor India (HMIL) said.
He said pre-owned car sales at Hyundai Advantage, the company’s used-car arm, sold 49,725 cars between January and November, compared with 32,149 cars in the same period in 2011. It expects to sell over 56,000 cars by end of this year.
Other companies such as Mahindra & Mahindra (M & M) and Toyota Kirloskar Motor are also seeing a similar trend, with more buyers in the second-hand market. M & M’s pre-owned outlets — Mahindra First Choice Wheels — sold 34,000 vehicles last year and this year, the company is targeting the sale of 46,000 units.
For buyers, second-hand cars offer value for money. “For example, a lot of customers are buying cars like Honda City at Rs 5.50 lakh rather than going for a brand new hatchback car for the same amount,” Yatin Chadha, Vice-President, Operations, Mahindra First Choice Wheels, said.
However, not all agree with this trend. “We do not see such a trend. Consumers are buying brand new cars as first-time buyers,” Mayank Pareekh, Chief Operating Officer (Marketing and Sales), Maruti Suzuki India, said.