Used Car Industry in India is Expected to Touch $73 Billion by FY28

The used car market in India is undergoing a significant transformation. Once seen as a less desirable option, buying a pre-owned vehicle is now a mainstream choice for many consumers. This shift is fueled by both traditional offline players like Maruti True Value, Mahindra First Choice, and Volkswagen's Das Welt Auto, as well as digital-first platforms such as Cars24, Cardekho, Carwale, Spinny, and Car&bike.

According to a recent report by IndianBlueBook, Das Welt Auto, and car&bike, the used car industry in India, currently valued at approximately $32.44 billion, is projected to nearly double to $73 billion by FY28. Ashutosh Pandey, MD and CEO of Mahindra First Choice Wheels highlights the substantial growth in the market. He notes that the used car industry has expanded from a 5-7% market share in 2010 to 25-27% today. This growth indicates not only the overall expansion of the auto market but also a maturing consumer base that now considers both used and new cars when making purchases.

Pandey attributes part of this confidence to Original Equipment Manufacturers (OEMs), which have helped assure customers of the value and performance of used vehicles. He emphasizes that used cars are no longer seen as a compromise but as a viable and mainstream option. However, he also points out that the supply of used cars, which typically lags by 2-3 years, is currently at its lowest due to reduced new car sales during the pandemic. He expects the market to rebound by FY26 as more new cars enter the market.

Ashish Gupta, Brand Director of Volkswagen Passenger Cars India, adds that the used car market is experiencing rapid growth. In 2018, Volkswagen sold 3,000 pre-owned vehicles, which increased to 30,000 last year. In 2023, the company saw a 12% growth in used car retail sales. Gupta notes that the Volkswagen Taigun now boasts a best residual value of 81% after 2-3 years of usage, indicating a significant improvement in the perception and value retention of used cars.

The IndianBlueBook report projects that the used car market, which had 5.2 million cars this year, will reach almost 8 million by 2026. The report also anticipates a shift in market dynamics, with the organized segment expected to grow from 29% in FY23 to 45% by FY28, while the unorganized segment is expected to decline from 71% to 55%.

Several factors are driving the increased demand for used cars in India. These include the rising prices of new cars, easier financing options, shorter ownership periods, and the implementation of the vehicle scrappage policy. Mohammed Turra, CEO-Designate of Mahindra First Choice, highlights the crucial role of financing in the growth of the used car industry. While 70-75% of new car sales are financed, only 25% of used car sales currently follow this route. Turra believes that this percentage could increase to 35-40% in the next few years, significantly boosting the used car market.

Additionally, car leasing companies like Quiklyz, Orix, and Avis lease offer customers the option to drive new and old cars at costs lower than traditional loans, further enhancing the appeal of used vehicles.

In summary, the used car industry in India is on a robust growth trajectory, driven by changing consumer perceptions, improved value retention, and supportive financial mechanisms. With an expected market size of $73 billion by FY28, the future looks promising for both buyers and sellers in this dynamic sector.