How Mahindra First Choice plans to spread its wings

The pre-owned vehicles arm of the Mahindra Group plans to add 30 outlets in a few days taking the total number to 1,000.

Mahindra First Choice Wheels (MFCW) is embarking on an aggressive expansion plan to tap into the burgeoning demand for used cars.

The pre-owned vehicles arm of the Mahindra Group plans to add 30 outlets in a few days taking the total number to 1,000, a top company official told Business Standard.

Even as the market for new cars remains depressed amid the economic fall out of the pandemic, that for pre-owned vehicles is seeing a strong recovery.

As a result, the market is expected to reach 80 per cent of what it was in February (a month before the lockdown) in volume terms, said Ashutosh Pandey, chief executive, MFCW.

“Four to five weeks back we conducted a research that clearly showed that personal mobility will be given preference over public transport and given the current economic situation, new entry level cars and used cars will be in great demand," said Pandey adding that it’s an “inflection point” for the used car business.

MFCW will be ending the current month with 10,000 to 11,000 cars as compared the average monthly sales of 15000 it was doing before the lockdown.

The company could have done more but for the supply issues.

“There is lot of demand, but supply is an issue,” said Pandey citing an instance of states like Bihar where the company has been finding it tough to meet demand.

Despite the current limitations including many areas being in the containment zone, MFCW expects to sell close to 200,000 vehicles by the end of this fiscal, same as last year.

Pandey said the overall used car market will end the year with a dip - 3.8 to 3.9 million units in FY21 as compared to 4.2 million units in FY20.

This is in sharp contrast to new car market which is expected to end the year with a sharp year-on-year contraction.

Rating agency Crisil expects passenger vehicles (PVs) sales volume (including exports) to plunge by 22-25 per cent this fiscal to a decadal low of 2.65 million units.

That would mark the second straight year of double-digit volume decline after the 15 per cent fall seen in fiscal 2020, it said in a release earlier this month.

To be sure, most of the other companies in the organized space – be it second hand outlets of car companies such as True Value or car aggregator platforms like Droom, Carz24 or classifieds like Olx, everyone is looking to tap into the strong growth momentum in the used car market.

Mahindra’s Pandey said while traditionally, tier two and three markets have been a big draw for pre-owned vehicles, this time around top cities too are showing traction as buyers re-prioritise their expenses amid salary cuts and lay-offs.

With disposable incomes coming down one has also seen a down-trading trend, he added.