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Used cars are the flavour of the day

Murali Iyer

Ever since we started going to school, the adage 'Old is Gold' has been pounded into our collective consciousness. When one looks at the second-hand car market in India, one finds it holds true more often than not.

My friend Mohan Datari, a middle-aged Mumbaikar, drools over the latest models of cars to roll out from the sleek factories at Gurgaon, Noida, Chennai, Maraimalainagar, Vadodara, etc. But his father still swears by the good 'ol Amby, 1960s vintage. So whenever Mohan visits his parents in the Chittoor district of Andhra Pradesh, he resigns himself to the fact that he has to make do with the Amby for the duration of his stay.

Similarly, I am resigned to the fact that my father has never developed a liking for new cars and prefers driving a staid Premier Padmini. Maybe, he is waiting for the day when his son presents him with the keys to a brand new automobile.

The Industry Scenario

There are a large number of people in this country who are converting from two-wheelers to four-wheelers, or are shopping around for a second set of four wheels for the family. A lot of them prefer second-hand cars (along with the likes of the above-mentioned gentlemen who prefer older versions) as against the new gizmos based on various parameters -- affordability, driveability, quality of roads, etc. Used cars seem to be the flavour of the day. And the market is being consciously developed by the efforts of manufacturers, dealers and financiers. When the global boss of Ford Motor, Jacques Nasser, visited India recently, he made a passionate plea against the import of used cars as they would harm the local car industry.

When my friends from the automobile industry told me that cars were being changed faster than our supermodels changed their itsy-bitsy nothings in the green room for a Rohit Bal or Tarun Tahiliani show, I did a double take. I knew that Mumbaikars like Raj Mirani have a penchant for owning and disposing off new cars before people in other cities can even say abracadabra. But to say that the phenomenon has caught on amongst the general public set my mind ticking.

Are we really talking of cars here?

A casual visit to Popular Automobiles and Sai Services (both at Andheri, a northwest Mumbai suburb) and Kantawala at King's Circle (in north central Mumbai) confirmed the impression. These dealers are riding on boom time and no complaints at that. The market for used cars is abuzz today and the offtake is up, up and away. And surprise, surprise!! The Indica, Matiz, Siena and Santro are also available. Going by the trends, the Ikon, Accent and others like Baleno, Corsa et al are also likely to be seen here soon -- post-launch!!

The Market Situation

This influx of cars is creating a pressure situation for mid-size cars. While new models like the Ikon, the Accent and Siena have been priced quite low (with the Baleno going for the jugular), their premia in the used car market also exhibits a similar trend. Dealers and financiers are of the opinion that come January 2000, the prices of some mid-size car models will be lower than that of a new Santro or Matiz, or even the yet to be launched 1000 cc Alto / Wagon R+. As it is, in a crowded market, the prices were under pressure. But the fallout has been to the consumer's benefit. Falling prices mean good deals, which seem to be getting better with time.

What is more, even the premium on less than a year old Indica, Matiz and Santro are dropping in the used car market. But the business is getting better and better. This is being driven home by the fact that radical changes are in store for buyers of used cars. Manufacturers are planning to open exclusive outlets (showrooms, anybody?) that will deal in the sale and purchase of second-hand cars. The aim is to provide car owners with an avenue to dispose old models and opt for newer ones. (Those of you that see parallels between this radical thinking and that of schemes floated by electronics and white goods companies like Akai, Aiwa, Godrej and their ilk are forgiven). Obviously, second-hand car buyers will benefit from this infrastructure.

Benefits

Once again, India's largest car manufacturer has been first off the blocks. A Maruti authorised service station at Delhi has started to deal in used cars. These company outlets will bring in a much-needed dose of professionalism, respectability and credibility in a business that is notorious for taking gullible customers for a ride, literally! The organised sector's grand entry will pose a serious challenge to the unorganised players currently monopolising the market; players that are generally small brokers and dealers.

The organised sector's entry will provide the customer with an avenue for attesting the quality and roadworthiness of the automobile in question. At the same time, it would also help in coordinating loans for used cars from players like Kotak Mahindra Primus.

This is bound to get even the Doubting Thomases into the second-hand car market. Deals tailored to suit every need and taste will follow these buyers. And as in everything else, the Western world provides a glimpse of what could be expected in the Indian market in the days to come.

In metros, a situation has emerged where I can walk into a car showroom and drive away with a new car. But a situation could probably arise where a dealer may be willing to rent out a car to Mrs Gupta for a 18 to 36 month period, at the end of which she could pay the residue and walk away with the car, or simply return the car. Now, that is convenience!

Market Movers

Generally, buyers rate cars having a doctor's badge on the windshield very high. This is due to the fact that doctors are considered to be safe with their driving and maintenance -- something to do with the profession -- and hence would provide the buyer with a good vehicle. The diesel versions of the Indica and Zen, as also the petrol version of the Escort, have been laggards in the used car sweepstakes. But the Maruti 800 and surprisingly the Zen find favour with a disproportionately large number of used car buyers.

Although the Omni is also an interesting buy, it is sought after by travel agents, transporters, etc as are the Mahindra models, the Sumo and the Trax. A lot of foreign automobiles find favour with people staying in the big cities. If you pass by Popular Automobiles in south Mumbai or Choksi (at Santa Cruz, another northwestern Mumbai suburb), you will notice the entry and exit of a large number of foreign brands -- the Mitsubishi Pajero, the Toyota Sera and the Toyota Corola being the more popular ones.

Then, there is a lot of interest in the mid-size segment, where the Esteem is the clear front-runner. The Cielo does not find much favour which is surprising, considering it has been positioned as a corporate vehicle. On the other hand, the corporate demand for good Astras and Escorts has been high. A lot of these cars arrive in the second-hand car market after having been repossessed by car finance companies who are keen to dispose off these vehicles at a decent price to cut down their losses. A slew of launches in the coming months should see a lot more action in this sector.

Future

The second-hand car market is estimated to be growing at a rate of 25%, while volumes have been shooting up at around 30%. Second-hand car dealers have been reporting a near 100% rise in sales and profits over the last few months. So what if the dealers have lost by way of falling margins (consequent to the fall in prices of used cars), they are more than making up in volumes. But more than the "pull" factor, it is the "push" factor from car finance companies that seems to be doing the trick.

The second-hand or used car market is all set to see a lot of action in the near future. If you are one of the neo-converts to cars, then you are in a good position to really drive a hard bargain. My dad used his second-hand, 1967-make Fiat 1100 (purchased for Rs 25,000) for more than three years. A decent level of maintenance went into the car. He ultimately sold it off more than a year back for Rs 30,000, only to buy a 1992 air-conditioned Premier Padmini for Rs 65,000.

No longer is a second-hand car owner looked down upon . On the contrary, they may well say: "Hand it down, brother!" It is just a car, after all.

USED CAR RATES

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