Foreign Investment In India | "Foreign Car Makers to Enter Pre-owned Car Business in India"

By: Xinhuas
Source: http://english.cri.cn
Category: Foreign Investment In India

Many foreign car manufacturers are entering into pre-owned car business in India as the used car segment is huge and lucrative with many middle class families who cannot afford new cars now prefer to buy second hand cars.

In a bid to shed its premium tag and shore up volumes, Czech car maker Skoda is working at entering the pre-owned car business in India by the end of the year.

The move comes on the back of increasing attempts by car companies to expand volumes in a sluggish market by initiating new customers into their brands through pre-owned vehicles and retaining older ones through loyalty programs.

Sudhir Rao, managing director, Skoda India, said, "We are working on putting in place a comprehensive growth strategy to penetrate deeper into the country with our range of products. We will not trigger discount wars to boost numbers but we are working on entering the pre-owned cars business to introduce more customers to our brand by the end of the year."

While the specifics of the used-car business are still being worked out, Skoda is ramping up efforts to expand overall reach by setting up 150 dealerships by 2014-15. The company has 102 outlets in India at present.

Though the Indian subsidiary at present contributes a little over three percent to Skoda's sales globally, Rao said the company was infusing 3 billion rupees (54.5 million U.S. dollars) to increase the local contents in its products and reduce cost of ownership to raise volumes "substantially" in the country and to achieve sales tally of 1.5 million units worldwide by 2018.

Automobile manufacturers are increasingly focusing on sales of pre-owned vehicles to expand volumes in a market where off-take of new vehicles have waned due to high interest rates, increased fuel costs, and uncertain economic conditions.

An automobile industry expert in India said the "pre-owned car business units not only provide dealers with opportunities to improve margin by selling used cars, they can also increase their sales of new vehicles through exchange programs."

For the quarter ended June 30, Maruti Suzuki expanded volumes by 18 percent to 60,467 units in sales made under exchange programs despite its sluggish performance in the domestic market.

"In urban areas where demand has fallen sharply, we are trying to push sales through our loyalty programs. Around 1.5 million customers service their vehicles every month, 10 percent of whom own vehicles which are more than 10 years old. We identify these consumers and offer them loyalty bonus to exchange their cars for new ones," said a senior executive at Maruti Suzuki.

Additionally, the company registers sales of pre-owned cars. The used car market in India stands at 2.7 million units but over 85 percent of it is currently controlled by players in the unorganized sector.

The convenience and warranty being offered by companies like Maruti Suzuki, Hyundai Motor India, Mahindra and Mahindra and Ford India are increasingly making consumers opt for purchase and sale of pre-owned vehicles through the organized route.

The Maruti Suzuki executive pointed out that around 30 percent of car buyers exchange old vehicles for new ones.

In the last financial year, Maruti Suzuki sold as many as 240, 000 pre-owned cars which is nearly a quarter of its overall sales of new vehicles. Hyundai Motor retailed pre-owned vehicles amounting to 15 to 16 percent of its sales in the domestic market through Hyundai Advantage outlets last year.

Source: http://english.cri.cn/6826/2012/09/10/3241s721601.htm