India is the world’s fourth-largest automobile market and is expected to become the third-largest by 2025. The country has emerged as one of the world’s largest and fastest-growing automotive markets in recent years, driven by an increasing middle-class population, rising disposable incomes, and a growing preference for personal transportation.
While the new car market in India is growing strong, there is a vast untapped potential in the used car market. Compared to developed economies like the USA, the used car market in India is still unexploited. The prospect of growth in the country of 1.3 billion people is enormous as there are just 22 cars per 1,000 people, compared to 980 in the US and 850 in the UK.
By FY2026–2027, it is expected that the Indian used car market will reach 8 million units, and the ratio of used to new cars will reach 1.9, thanks to factors such as rising middle class, rising motorization rate, shorter vehicle replacement cycle, and accessibility to used car financing.
The unorganized used car market in India is evolving into a more formalized one. Market consolidation owing to the entry of OEMs and New Car Dealerships in the organized used car market has created awareness and preference for certified pre-owned cars in India. Certified pre-owned cars are used cars that have undergone a thorough inspection and refurbishment process, ensuring their quality and reliability, offering consumers the peace of mind of purchasing a car that is almost as good as new.
The digital revolution has played a vital role in transforming how businesses operate across industries; the automobile industry is no exception. New-age platforms have emerged, that help new car dealerships run efficient used car programs not just in Tier 1 markets, but also in Tier 2 and 3 markets where potential lies largely untapped. In India, the demand for used automobiles is skewed toward non-metro areas, whereas at least 65% of the supply was concentrated in urban areas like Mumbai, Delhi NCR, Bangalore, Chennai, and Hyderabad in FY2021–2022.
It’s my firm belief that small towns are expected to drive substantial growth as the share of the non-metro city’s used vehicle sales, which is anticipated to escalate to 75% (in the next four-five years) from the current 65%. Digitization has crucially addressed the old legacy issues that have plagued the industry, by enabling greater transparency in the used car market transactions and helping to build consumer trust. To fully realize the potential of the used car market in India, it will be essential to further work towards standardization, regulation, and implementing transparent and trustworthy platforms for buying and selling used cars.
This is where innovative deployment of digitalization and AI/ML can help usher in greater transparency and fairness in the pre-owned car market. Digitalization in the used car market can be achieved through various means, such as online portals, mobile applications, and digital platforms. These platforms can provide a comprehensive database of used cars and their specifications, history, and pricing information. This would help buyers and sellers make informed decisions and arrive at a transparent and fair price. AI/ML algorithms can also analyse various data points, such as age, mileage, condition, and demand for a particular car model.
Based on the available standardized data, this enables the algorithm to suggest a fair market price for the car instead on relying on available market estimates. Moreover, digitalization and AI/ML can make the used car market more accessible to buyers and sellers across different regions. This would result in a larger market, competition, and fairer prices.
New Car Dealers in India retail approximately 3 to 5% of the country’s pre-owned cars vs. 33% in the US. New car dealerships in India have not yet fully deployed their real estate and assets to realise the full potential of the used car market. This includes leveraging their existing infrastructure and manpower coupled with innovation and tech driven new age platforms.
With a population of over 1.3 billion, India has a large potential customer base for the used car market. Moreover, with an increasing number of young people entering the workforce, the demand for used cars is expected to increase. The future of India’s used car market is very promising, with significant potential for growth and innovation. However, to fully realize this potential, the industry must focus on building consumer trust through transparency and quality assurance. With the right strategies and business models, the used car market in India has the potential to grow and expand at double the rate at a CAGR of 19.5% till FY2026-2027 from the $23 billion valuation in FY2022, providing a significant boost to the automobile industry in India.
