The Covid-19 pandemic has disrupted human life and all forms of economic activities across the world.
To contain the spread of this virus, there is an absolute need to maintain physical distancing in society, but implementation of physical distancing in Zimbabwe comes across as a serious challenge, especially in densely populated towns and cities, where a large percentage of the population relies on public transportation and shared mobility.
Several research reports and surveys indicate that, going forward, an increasing number of respondents are willing to opt for personal transport. Experts suggest that the need for personal mobility is likely to drive demand for used cars, followed by two-wheelers and budget new cars, in the short term. We take a closer look at what the used car market will be facing in the months to come.
Growing used car market
The used car market in India was valued at US$24,24 billion in 2019, and was expected to grow at a compounded annual growth rate of 15,12 percent over 2020-2025, as per a report by Grant Thorton. The unorganised sector in this industry constitutes a lion’s share of 82 percent, although several organised players have entered this highly profitable space.
These include new-car manufacturers, among which are luxury brands like Mercedes-Benz, BMW and Audi.
Two of the largest players in the organised used car retail business — Maruti True Value and Mahindra First Choice Wheels Ltd. — sold 419 000 and 250 000 units respectively, in the financial year 2019-2020.
Mahindra First Choice Wheels Ltd. claims that around 4,2 million used cars exchanged hands in India during FY2020.
This number indicates an industry growth of 5 percent, compared to FY2019, which witnessed a trade of around 4 million cars.
Reports estimate the current used car market in India to be 1,2 to 1,4 times larger than that of new cars, and Maruti True Value forecasts this to grow even further to 1,7 times.
While the reduction in Goods and Services Tax — from 28 percent to 12 percent in 2018 has been one of the key factors to boost used car sales, the constantly rising prices of new cars (owing to newer technology, cleaner emissions and better safety), remains one of the core factors to steer buyers in the direction of pre-owned vehicles.
Ashutosh Pandey, CEO and MD of Mahindra First Choice Wheels Ltd. revealed that in the pre-Covid-19 phase, low priced cars accounted for 50 percent of used car sales, and it’s likely to remain the same going forward.
“This would still be the most preferred price point because there seems to be down-trading to the extent of 10-30 percent, so even customers who were in higher range earlier would now trade in this segment.”
“Research has shown that consumers who were, in the beginning of the year, willing to purchase new cars, are gradually opting for pre-owned vehicles due to budget cuts and also because pre-owned cars are value for money,” states Jatin Ahuja, founder, Big Boy Toyz (BBT), a premium luxury used car retailer.
Compact cars account for majority of the demand, and a high percentage of used cars sold are four to five years old. Niraj Singh, CEO and co-founder of Spinny, an organised used car retailer opined, “The lower price segment for premium hatchbacks and compact sedans is the most popular segment in the used car