Track-II heats up on Indian autobahn

With manufacturers churning out two models on an average as well as variants, the model churn has also increased. For example, in the Rs 6-10 lakh bracket, the average ownership period of a model has come down from five to three years.

Industry observers say that the organised used car industry is currently worth around Rs 3,000 crore.

“We are expecting a 30-40 per cent growth in value terms in the current fiscal,” according to Kotak Mahindra Primus executive director Pankaj Desai. With an average sale value of Rs 2 lakh per unit, the number of used cars sold annually in the organised sector works out to 1.5 lakh units.

Industry experts estimate the total size of the used car market to be around 3.5-4 lakh units annually. For every two new cars sold in India, one used car is sold.

ICICI Bank group business head (car and two-wheeler loans) Sachin Khandelwal feels that the industry has started getting organised around three years back with players like Automart stepping in. More recently, manufacturers have also stepped into the used car business — Maruti offers True Value, while Ford has Ford Assured.

ICICI Bank has financed 3,000 used cars in 2003-04, up from 1,800 a year ago.

Finance rates for used cars turn progressively lower, as one moves to higher-end models. There can be a difference of a hundred basis points as one moves across segments, according to Desai.

Kotak Primus charges the end customer anywhere around 12-13 per cent. The final rate for the customer is arrived at after deducting dealer commissions from the rack rate. Desai feels that with the organised players stepping in, issues like title deed of the car and valuation have become much more transparent.

Mahindra & Mahindra (M&M), which has a used car joint venture called Automart, is also bullish on the prospects. “We are actively looking at our dealers becoming franchisees of Automart. There is synergy with our existing automobile business,” feels M&M executive vice president (marketing and sales) Rajesh Jejurikar.