Consumers’ aspirations for premium products are driving the demand for luxury cars: Sumit Garg, Luxury Ride
Consumers are okay with pre-owned used cars, as they give value for money. At the same time, the global semiconductor shortage and urbanisation have become the top drivers behind the growth of the pre-owned car sales sector.
Anushruti Singh June 12, 2022
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While new car sales have plummeted due to the global semiconductor shortage; it seems that the times are auspicious for the pre-owned car sales sector. With pre-owned car sales outpacing the new car sales, the market scenario for the used car sector looks positive.
According to the OLX Autos-CRISIL study, the Indian used car market is expected to reach a size of over 70 lakh vehicles by 2025-26, up from 38 lakh vehicles in 2020-21. “It’s growing at around 12-14 per cent over the next few years. The pre-owned car industry is expected to clock a growth rate of 15 per cent in FY22, with the COVID-19 pandemic, digitalisation, the changing demographics and aspirations, first-time buyers, and the availability of financing options acting as growth drivers,” states the study.
In a conversation with SME Futures, Sumit Garg, MD & Co-founder of Luxury Ride says that consumers’ aspirations for luxury cars are growing. But at the same time, he feels that the sector is still very much fragmented and constantly evolving. And newer tech interventions such as Blockchain can help it to get more organised. He also highlights the need for regulatory provisions for this sector.
Luxury cars are no longer a far-fetched dream, how do you look at the current sales market for premium cars, in general?
For the past few years, consumers have been showing great interest in the pre-owned luxury car market with an invigorated enthusiasm for premium cars, which is accounting for the exponential rise of this industry. The steep surge in the demand for pre-owned cars is driven by a multitude of factors that can be attributed to the pandemic, changing consumer behaviour, digitisation, the emergence of organised players, the increase in disposable incomes and the availability of financing options.
Also, the rapid rate at which urbanisation is happening is also a major factor contributing towards the growth of the pre-owned luxury car market. Over the years, there has been an increase in disposable incomes which is driving the change in the aspirations of the consumers to upgrade to premium products.
Also, tell us how big the pre-owned luxury car sales market is and what is its share in the overall sales figures?
According to a study by OLX-CRISIL Auto, the pre-owned car industry is estimated to grow at a CAGR rate of 12-14 per cent in the next five years, taking the market size to more than 7 million vehicles by FY26 from the 3.8 million units that it clocked in 2021. The pre-owned car market has been showing a promising growth trajectory in recent years. Where it marked a growth rate of 9 percent between FY 15 and FY 21, it is estimated that in FY 22 the sector will grow by 15-20 percent.
Perceiving these revelations to be in favour of this emerging segment, it is expected that the pre-owned car market will touch 8.2 million units annually by FY 25 from the 3.8 million units that it clocked in FY 21.
According to a CRISIL report, premium vehicles sales are on the upswing, can you cite the various reasons for that? Also, do you feel that the sales of pre-owned cars are outpacing the sales of the new ones?
The automobile sector is a very volatile industry and the changes that have happened in the recent years have engendered just the right market mix for the growth of the pre-owned luxury car market. The emerging millennial population as the potential consumer base has an incessant desire to own a luxury car, but at the same time they are very wise and make an effort to maintain their financial stability. This leads many of them to highly consider purchasing a pre-owned luxury car which is almost new and gives an unrivalled performance at the price of a new economical car.
Looking at the trend of owning a means of personal mobility post the pandemic, the masses are moving towards the pre-owned car market. As the current pre-owned car sales in India stand at 1.5 times more than the new car sales, the luxury car segment will also witness a rise in demand considering the increase in disposable incomes and the almost same price bracket of the pre-owned luxury cars and the economical cars.
How business has evolved for Luxury Ride, and how’s the competition in the market?
In 2012, when we entered the market, it was named as Koibicar.com, but then later in 2015 it was named as Luxury Ride. In the initial years, we were struggling to arrange for cars to showcase in our first showroom in Delhi.
At that time, I requested my mentor and seed investor to lend me cars just for the purpose of displaying them in the showroom. But over the years we have come a long way due to our passion for luxury cars combined with our dogged persistence and our penchant for hard work.
Our second outlet at my hometown Karnal, till date is India’s largest single location showroom with a 4-floor building spread across 1 acre of land with the capacity to display 50+ cars. Since then, there has been no looking back for us and today Luxury Ride has seven showrooms across North India in New Delhi, Gurugram, Karnal, Ludhiana, Chandigarh, Jaipur and Dehradun.
The pre-owned car sales segment is still very unorganised, even though there are auto tech players such as your platform in the arena. Your thoughts on why India’s market is so slow on this front.
Considering that the pre-owned segment is expanding at an exponential rate, to amplify its sales and services, it is the need of the hour to bring about the confluence of its organised and unorganised assets for a deeper penetration into the market. Currently, the sector is unevenly divided between the organised, the semi-organised and the unorganised players.
Although the organised players are making inroads into the market, which was experienced starkly during the pandemic, still they only make up about 20 per cent of the market. This collaboration will help them widen their reach and at the same time also improve their services. With the help of this association, the organised players and even the start-ups can take advantage of the strong network and reputation built up by the local dealers over the years.
Even the individual dealers can benefit from the tie-up by tapping into a larger pool of buyers who are in search of a seamless experience, more options and assured warranties, etc. On the other hand, the organised players can bring about the integration of advanced technologies such as Blockchain that can help in the proper storage and maintenance of intricate information like vehicle ownership, parts replacement and service history details, giving an end-to-end insight into the actual condition of the vehicle. They can provide capital support to the local dealers to become more digitally proficient and help them to create a seamless interface for their customer services.
What are the most important policy changes that this sector requires?
The pre-owned car industry has online and offline players who act as intermediaries in the transactions between the buyers and the sellers. These transactions take place through online platforms or at physical offices and garages and are mostly unorganised.
At present, there are no regulatory provisions for these intermediaries, although they are at the centre of the transactions for pre-owned cars and trade a car multiple times before it is eventually registered in the name of the end-owner.
The government is really pushing EV mobility; do you think there will be a separate pre-owned market for them in the future? Are you exploring it?
Considering that EVs are the future of the automobile industry, India is working towards the goal of becoming an EV first nation by 2030. In India, the EV space is growing significantly, and the government and the auto car manufacturers have been investing in R&D and in various products and services to make it future ready, but the reality is that it is still in its nascent stage.
I believe, it will take some years when it comes to the pre-owned EV car market. The need of the hour is to invest in the right technology and have a robust infrastructure in place to make India EV ready. However, looking at the efforts made by the government to mainstream EVs, the future looks promising for the pre-owned EV car segment as well.
How do you see the used luxury car market expanding?
As stated above, the various changes that are taking place in the automobile industry are working acutely in favour of the pre-owned luxury car market. The segment is in the middle of a very promising transformation.
Owing to the pandemic, many organised players have emerged in the market who are bringing about the rapid digitisation and the advanced technological evolution of this sector. They are leaving no stone unturned in the realisation of data monetisation and in-vehicle connectivity. They are providing a plethora of subscription options, rental facilities, charging facilities, and long-term maintenance packages to ramp up the organization and growth of this sector.
This is a radical step in organising this otherwise highly fragmented sector which will be very crucial in instilling trust amongst the consumer base that will drive the exponential growth of this industry. According to industry experts, it is expected that this digital transformation will lead to the growth of the total sales of this sector from 20 percent in FY21 to 30 percent in FY26.
What are your future plans for Luxury Ride?
Currently, with seven outlets in the country we at Luxury Ride strive to increase our penetration deeper into the market and make our presence pan India. We have plans to come up with 50 new showrooms in the next 4-5 years and during this expansion we also want to focus on the diversification of our business. We want to establish Luxury Ride as a leader in the pre-owned car sales arena with our 360-degree solutions.