Mahindra sees used car market growth at CAGR of 25%

Mahindra First Choice Wheels, India's largest organised multi-brand pre-owned car company, expects the country's used car market to more than double to 7 million units by 2020, although only a fraction of the used-car market in India is in the organised segment.

Managing director Nagendra Palle said he expects the used car segment to grow at a compounded annual rate of 25 per cent in the coming years, faster than the current 15 per cent. "The market is fast maturing; there is a tremendous potential in the interiors of the country which will offer incremental volumes in the future," said Palle.

At 22 cars per 1,000 people, India's car market is way short of its potential, he added. The company, which has over a fourth of the market in the organised used space, is aiming to expand volume to 1.2 lakh units by 2020 from 85,000 units currently.

By then, it expects five-fold growth in turnover to $100 million.

While new car sales have been sluggish, the used car market has been growing at a CAGR of 15 per cent in the last five years, and higher in the organised used car space. The company expects growth to accelerate on the back on improving sentiment and a growing economy.

The company is in the process of expanding its reach to more than 1,300 outlets by the end of the year from 880 now. A large part of it will be in small cities and towns. Apart from selling used cars, the company is seeing additional revenue from the online auctioning business and vehicle inspection. Mahindra First Choice auctions about 7,000 vehicles a year.

Just under half (45 per cent) of all pre-owned cars are sold in metros cities. Non-metros, according to the report, are growing faster than the metros. The north leads the pre-owned car market in India, accounting for 36 per cent of sales, followed by the West (27 per cent), South (26 per cent) and the East (11 per cent). It also explained how the market is still highly unorganised.

The pre-owned car channels are highly fragmented with four primary market segments: Organised with 12 per cent of the market share, semi-organised with 35 per cent, consumer to consumer with 34 per cent and the unorganised segment with 19 per cent of the total volume.

The unorganised sector accounts for the bulk of the dealer population at 58 per cent, but just 19 per cent of the volume. There are no formal wholesale channels for dealers to procure pre-owned cars.