Non-metros are expected to witness a huge growth in used car sales over the next 4-5 years and may account for 3/4th of the volumes, supported by growing buyers’ interest in pre-owned cars and increasing trust with the pre-owned car platforms.

“About 65% of the used car supply in FY22 was concentrated in metropolitan centers such as Mumbai, Delhi NCR, Bengaluru, Chennai, and Hyderabad. As expected, markets are small outside of the top 40 cities, with only the top 20 out of 900 cities accounting for 25% of the market. However, the demand in smaller towns is expected to swell at a 30% CAGR by FY27, compared to a 10% CAGR in the top 40 cities, according to Indian Blue Book Report on the used car market.

Small towns are expected to witness substantial growth as the share of the non-metro cities’ used vehicle sales is anticipated to grow to 75% over the next four-five years, it added.

Growing momentum

In FY22, about 4.4 million used cars were sold in India amid disruptions and challenging market conditions. This growth momentum is expected to accelerate, with the market reaching 8 million by FY27.

The Indian used car industry was valued at $23 billion in FY22, and it is expected to grow at a CAGR of 19.5% in value and 12.7% in volume by FY27. “We are likely to see a significant shift in the Indian used car market over the next decade, with buyers evolving and becoming more informed,” it pointed out.

Used cars, which were once considered a compromise, are now making their way into the consideration of buyers who have no apprehensions about purchasing a pre-owned car.

Increasing consumer trust

Over the years, the trust deficit between a buyer and seller has considerably reduced, thanks largely to transparent, smooth, safe, secure, and swift transactions in the last four-five years. Players with various business models, addressing various customer pain points and approaching the sector from many perspectives have converted the industry into one of India’s most promising consumer tech markets.

The increasing digitisation of the consumer journey has also been a critical factor in gaining consumer trust. While most of the exploration and consideration phases have shifted online, the majority of the purchases continue to take place in dealerships and other physical touchpoints, it added.

The organised used car market’s share is all set to increase from 20% in FY22 to 45% in FY27. As the average age of vehicle ownership decreases, there would be a steady increase in the availability of used cars. Dealerships would lead towards a path of being highly profitable. This coupled with a seamless transaction and ownership experience will eventually drive future growth.

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