By invitation: Ashutosh Pandey, CEO of Mahindra First Choice Wheels, talks about the fate of Used Cars in the post-COVID world.
Astrology is a seductive pastime. And so is its corporate cousin, market research. While astrologers were nursing their battered reputation as COVID laid bare prophecies of enjoyable holidays and fabulous career breaks as anything but hollow, it was time for market researchers to enter the fray with projections of post-COVID business sentiment. The most widely anticipated, and hotly contested of these research findings relate to the (mis)fortunes of the auto sector. It is now widely believed that auto sector is in for a rough ride for rest of the financial year, with revival possibly in FY’22 or beyond. The fate of dealerships and of allied sectors, particularly ride hailing and auto components, is thought to be equally dismal. Curiously however, the unlikely segment everyone seems to be betting on is used cars, with an almost unqualified consensus about its rosy future.
A closer look reveals a slightly nuanced reality. A study done by carandbike and BrandScapes (the most comprehensive one for used cars, covering consumers from across the country, and the only one featuring dealers) highlights the following six trends:
1. There is some evidence of pent-up demand for used cars, though the impact of reduced household discretionary spends is yet to be factored.
2. There is noticeable shift in customer preference from new to used cars amongst first time buyers and millennials.
3. Car customers are likely to down-trade, with budget likely to be lower by 10-30%.
4. Preference for personal vehicles as preferred mode of commute post the lockdown is quite significant.
5. Surprisingly, potential two-wheeler customers are considering buying used cars, despite the higher outlay required.
6. Online won’t be the big disrupter just yet; majority of customers continue to value in-store experience at showrooms.
While these trends confirm the preference for used cars, there are other factors at work that might slow down this charge. The most important is supply of used vehicles. The carandbike-BrandScapes study indicates that a large majority of existing car owners, who were considering selling their cars or exchanging it for a new one before COVID, are now planning to hold on to it for at least one more year.
The preference for used cars will be at an all time high post lockdown
This will impact the supply of used cars in the market, in addition to likely firming up of prices of used cars. Also, while there is a discernible shift in sentiment away from public transport at the moment, it is clear that public transport and ride hailing services will remain the lifeline for a large majority of commuters. The extent to which the infection spreads (or does not) once public transport opens up, and the safety measures implemented therein, will determine whether this sentiment gets strengthened or moderated in due course.
Having said that, it is clear that the preference for used cars is at its all time high. Even while the lockdown continues and showrooms remain shuttered, the Mahindra First Choice outlets have more bookings than they had prior to the lockdown, with customers calling on the help line to discuss their choice of vehicles. The patient efforts that have been put to develop trust amongst customers (such as certification, warranty and post-warranty support) seem to be paying off, at least for organised players such as Mahindra First Choice. It’s early days though. And just like astrologers, researchers could be eating humble pie as the virus executes another one of the endless tricks in its repertoire!