Used car market gets Rs 1-lakh car jitters

The fast-growing segment worries about volumes, pricing dip, though some disagree on impact

Automobile giant Tata Motor is yet to unveil its dream project8212;the Rs 1 lakh car8212;but the fledging used car market is already getting the jitters. The car, set to make its debut in 2008, may not only arrest the rapid growth of the used-car segment but also herald a fall in prices of models.

Over the past couple of years, the used car market has been beating the bullish growth in the new car market. The passenger car segment has grown by an average 12 per cent over the past five years. Though confirmed figures are not available, analysts say the used car market has been speeding ahead at over 30 per cent growth.

8216;8216;Last year, the organised used car market accounted for nearly 6.5-7 lakh cars a year. The growth is intense and the market is expected to expand to a million units by 2008,8217;8217; said ICICI General Manager Sachin Khandelwal.

The growth has been driven by easy credit availability as well as industry majors like Maruti and Hyundai joining the fray by establishing their own used car distribution networks. Of course, the widening gap between the price points of two-wheelers and cars also contributed to growth.

8216;8216;The Tata 1 lakh car will fill in the gap between two wheelers and cars, thus displacing the used car segment. It will not affect the whole market as such but the overall strategy in the volume driven small car segment will change,8217;8217; agrees an industry source.

The direct impact could be on the pricing as existing prices of second-hand Maruti 800, Alto and Hyundai Santro may fall. Further, with an option of a new car at hand, volumes may fall as well. 8216;8216;At the end of the day, pricing will be an issue in a sensitive industry like ours. A new car has its advantages but how good it actually will be has to be seen,8217;8217; said a SIAM official.

However, the used car market may hamper the growth prospects of Tata8217;s car as well. With input costs on a perpetual rise, industry majors have had to increase prices time and again in the last one year. Many believe that Tata8217;s car will be a very basic version with no frills to offset the high costs of steel, aluminium and rubber.

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8216;8216;There will always be a difference between a Rs 2.25 lakh car and a Rs 1 lakh car. They belong to a different category and the temptation of a higher-end car is always higher. This may work in favour of the used-car market,8217;8217; said a Maruti Udyog Ltd official.

Either way, the much-awaited car is going to change the equations in the Indian used car market.