By Sumit Garg
With the substantial rise in new car prices, the used luxury car market is witnessing significant growth. Even many new-age first-time buyers are opting for used luxury cars.
The new car market has been projecting dampened sales because of cars getting pricier. The volatile market is invariably affected by various market mixes such as new policies, global market, commodity cost, supply chain, etc. Amidst the unstable new car market, the pre-owned luxury car market has gained popularity and witnessed substantial growth over time.
The new car industry has been plagued with soaring prices owing to numerous factors. Where the introduction of BSVI norms mediated a substantial price hike to accommodate the latest technology for pollution elimination, the pandemic accentuated the problem further. It provided a great deal of market resistance, as operations were severely disrupted observing phase-wise lockdown. Moreover, the limited mobility crashed the burgeoning demand for new cars. The situation got even more complicated with the global semiconductor shortage that acutely disrupted the supply chain.
Apart from this, the economic slowdown has highly resulted in a decline in sales of new cars. This coupled with various other factors like soaring steel prices, global challenges, supply chain shortages, etc. cumulatively resulted in the disproportionality between supply and demand. It has exacerbated the gap between supply and demand, which is one of the main causes of the skyrocketing price of new cars. Manufacturers found themselves in a hard spot to meet the rising demand for cars. It resulted in a long waiting period, lasting from 6 months to even one year.
As a result, consumers started looking for other options and soon found solace in pre-owned cars. As millennials and the affluent class formed the majority of the consumer base, they paved the way for the pre-owned luxury car segment. This emerging consumer base is generally driven by the desire to own something luxurious and simultaneously has access to increased disposable income.
They are wise enough to exercise extravagance but within budget, for which pre-owned luxury cars come to their rescue, offering value for money with unrivalled performance and the latest technology. It can be said that their desire to own premium cars has given impetus to the industry. Those previously owned cars in the price range of Rs 35–40 lakh are upgrading themselves to premium cars with pre-owned luxury cars.
Realizing the potential in the segment, the organized players tapped into the existing void to create opportunities and expand the market for pre-owned luxury cars. They left no stone unturned in giving a structural framework to the otherwise scattered industry. Venturing into a mix of online and offline business models along with after-sales services, warranties, additional aid of easy financing options, and many more facilities instilled faith amongst the potential customers who, if taken back to a setup of a few years ago, would be highly anxious in purchasing a pre-owned luxury car.
This promising growth trajectory is only expected to escalate with the upcoming festive season. For instance, the occasion of ‘dhanteras’ is marked by purchasing metallic items. Therefore, for those planning to purchase a car, time for it to be delivered on this day to make the event auspicious. But the factors plaguing the new car industry are expected to stretch even through the festive period, overlooking the mismatch in supply and demand.
Given this widening gap of supply and demand and even the difficulty of procuring the costly commodities, the OEMs will be rendered unable to offer any discount on the new cars. Considering that customers want their cars to be delivered on the day of the celebration, they will prefer pre-owned luxury cars showing better value for money. Also, during the festive season, consumers expect huge discounts, and a lack of lucrative discounts on the new car market will encourage them to explore pre-owned luxury cars.
This invigorated customer faith in the segment can be attributed to the 15% CAGR growth of pre-owned luxury cars in the first half of 2022. Even against the increasing demand for cars, the sector could meet the demand with a timely supply of cars. Therefore, the potential customers are highly hopeful of receiving their pre-owned luxury car on time.
Over the years, the demand for pre-owned luxurious automobiles is growing exponentially yearly, as luxurious automobile owners normally sell their automobiles within 12 months or upgrade to a better model. Along with the Independent dealers, an increasing number of automobile producers are getting into the marketplace of pre-owned automobiles like Maruti’s True Value, Mahindra’s First Choice or even groups like Porsche are foraying into the pre-owned marketplace in India.
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(Sumit Garg is the Managing Director & Co-founder of Luxury Ride.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)