Anish Verma’s used car dealership, Kumar’s Car World, has seen better days. While Verma’s Ghaziabad-based business sells refurbished cars for every level of customer—from Hyundai’s entry-level Santro to a high-end Mercedes CLA200—buyers are fewer and further between. From 15-16 deals per month, Verma’s sales have come down to about 7-8. 

But his predicament, while far from ideal, isn’t indicative of the car business at large. Verma is still selling. New car sales, on the other hand, have plummeted. With India’s economy slowing, automobile sales fell 12% year-on-year in November, according to the Society of Indian Automobile Manufacturers’ (SIAM) data.

Used car businesses, on the other hand, continue to drive forward.

A report by auto manufacturer Mahindra and Mahindra’s (M&M) used car vertical Mahindra First Choice states that 4 million used cars were sold in India in the year ended March 2019. Growing at 10-12%, the used car market is now 1.2X the size of the new car market. In fact, the new vehicle space is trending in the opposite direction. New two-wheelers recorded a decline of 14.27% in sales in November 2019 from 16,45,783 vehicles the previous year, as did commercial vehicles.

Clearly, the wheels are turning for used cars. The industry has piqued investor interest a fair bit. Four online car platforms dealing in used cars—CarDekho, Cars24, Olx Cash My Car and Spinny—have raised over $620 million in total in the last three months.

But despite the growth metrics and big fundraises, used car businesses—just like Verma’s—aren’t unaffected by the economic slowdown. It’s just that they’ve also benefited from new car sales falling.

In addition, a large part of the growth recorded in the used car space is coming from a shift to organised sales, and not necessarily from an increase in the numbers of cars sold. Experts say that it’s a major change in a market which has historically been peer-to-peer driven. According to Mahindra First Choice’s Indian Blue Book data, the share of unorganised segment was as high as 70% in 2011, which has now come down to 48%. Unorganised sales include peer-to-peer and deals led by brokers or individuals. OEMs (Original equipment manufacturers), dealers, franchisees and online platforms form the organised segment.

A huge part of this push towards being organised has been due to online car platforms. The same ones drawing investors, and for good reason. As the used car market in India matures and players like Cardekho, Cars24 and Spinny increase in size, there will be opportunities for good exit multiples, believe experts.

To put the scope of the used car industry in perspective, in the US, it accounts for almost half the auto retail market, with annual sales of more than $350 billion. In China, 13.82 million used cars were sold in 2018.



Vandana is based in Delhi. She covers vertically focussed startups in consumer internet space and also writes on travel tech and smartphones for The Ken. She has spent 13 years in journalism covering a wide range of subjects- equity markets, mutual funds to education and skilling, working at organisations such as Business Standard, CNBC TV18 and The Week in the past.

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