Used CAR Market Witnesses Steady Rise in Demand, as Shortage of Chip Hurts of New car Supply

Automakers belonging to India, are facing severe supply related issues due to semi conductor chip shortage, after it has witnessed a sharp V shaped recovery of about 140% in the month of April to June 2021 as compared to 2020, this has led to aberrant year for the industry.

Most of the experts tend to believe that factors such as rise in the input cost as well as commodity price would result in longer waiting period and not to forget festive season discount, all this could adversely impact consumer sentiment for months to come.

But with regards to used car market, all these developments have come as a silver lining, especially at a time when carmakers such as Mahindra & Mahindra, Hyundai and Toyota have already made an announcement that their cars would cost more.

Maruti, which is the largest carmaker in India, has made announcement that its cars would cost more, this would be the third time. Price has been hiked by the company. The waiting period for the select mode would be around 2 months for some model and those car modes which are in demand, for these cars the waiting period might nearing to 7 months.

Umesh Hora, CEO of the used car business, CARDekho, stated that used car demand has been rising because of chip shortage and long waiting period to receive new cars. The company has been witnessing nearing to 3 times the number of inquiries since previous 4 weeks or so. There has been no major impact due to rise in fuel prices.

During the previous year, the demand was a challenge, but this time supply has become a major problem because of the ongoing shortage of semiconductors. The waiting period ranges from 2 to 3 months and it can also be 12 months for specific models as well as variants. Hence the companies are trying to convince the customers to book new cars as early as possible because there could be possibility, that they might not receive deliveries on specific dates, which they have in mind. There has been no respite still with regards to semiconductor shortage and it might take another 4 to 5 months for things to begin stabilizing as well as supply to normalize.

Yes, true, even though there has been demand for used cars has risen, Honda admits that even this market is facing varied constraints, at macro level, the used car market is also witnessing major constrained supply to some extent as people are not willing to sell their old cars as wait period to get delivery of the new car is long.

Cars24, is one of the largest players in the market, it has raised a point, there is big use case for used car in India, here only 2 cars per 100 people. There exist definitely affordability issue, hence we are happy that we are enabling people to own car, Vikram Chopra, Co-founder & CEO, Cars24

The Gurugram based firm boast of a selection of nearing to 20,000 cars and it is valued at $1.84 billion. Chopra has stated that just like the new passenger car market, he has been witnessing consistent growth in demand in the used car space. The 2nd hand car market is derivative of the primary market. Everything, which happen in new cars tend to impact the used car market. It might be due to some lag. For example, all the price rise that has been taken in the new car market in the last few years, that would start impacting the pre-owned market starting from the next year. He stated.