Tier II cities drive used car sales: OLX-CRISIL study

    The second-hand car market currently outpaces the new car industry in India.

    Published On Dec 02, 2022 04:00:00 PM

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    OLX used car study in Tier II cities
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    OLX Autos joined hands with CRISIL to study and analyse trends in the Indian pre-owned market in the past five years – from FY17 to FY22. A key takeaway from the study was that tier II cities drive the demand for used cars in the country.

    1. 40-45 percent used car buyers are first time car owners
    2. Share of SUVs, MPVs have grown from 17 percent in FY17 to 22 percent in FY22

    Used car market grows post pandemic

    The study reveals that like every industry, even the pre-owned car market was hit hard by the Covid-19 pandemic in FY21, however, in FY22, it has not only reached pre-pandemic levels in volume but has also grown by 9 percent since – and continues to outpace the new car industry.

    “Post pandemic, the Indian automobile sector has shown strong growth both in the new car as  well as the pre-owned car market,” says Hemal Thakkar, director, CRISIL Research. “Increased preference for personal mobility, easing supply-side constraints, increased discretionary and a shift in product mix are contributing towards the sector’s growth. Our yearly study of the market with OLX Autos highlights these dynamic shifts alongside the move to digitally driven and organised players that are further supporting the fast track growth of the used car market.”

    Used car market trends

    An interesting trend that’s been witnessed is that tier II cities are driving demand for pre-owned cars, comprising a whopping 40 percent of the total demand, followed by metro cities at 35 percent and tier III cities and rural demand which constitutes the balance 25 percent.

    According to OLX India CEO Amit Kumar, “There is a clear preference for pre-owned cars among consumers in larger towns, fuelled by an accelerated shift to digital channels – that offer higher convenience and build consumer trust.”

    Buyers from metro cities give weightage to the used vehicle’s age and prefer newer cars, whereas the price is the driving factor for buyers belonging to tier II and III cities.

    Some key takeaways from this study are that 58 percent of used cars exchanging hands are hatchbacks, while sedans form just 12 percent of the total sales in FY22. Like in the new car space, SUVs and MPVs are gaining traction at a rapid pace in the pre-owned market, growing in share from 17 percent in FY17 to 22 percent in FY22. Interestingly, these segments are also seeing faster replacement cycles, so owners are selling off their SUVs much sooner than some other segments.

    Another interesting trend witnessed was that 40-45 percent of pre-owned car buyers are first-time car owners. Women buyers account for nearly 10 percent of total used car demand in metro and tier I cities, and form less 5 percent in tier II and III cities.

    Kumar said, “With 37 percent of the Indian population living in urban areas by 2025, we will see a sharp rise in disposable incomes and affordability for discretionary spending on personal mobility.” The study goes on to forecast the pre-owned car market is expected to double in size from 4.1 million units in FY22 to 8.2 million units in FY27, outselling the new car market by 1.7 times.

    Also read:

    Used car market to grow to 7mn units by 2026

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