Consumer aspirations for premium products drive demand for luxury cars: Sumit Garg, Luxury Ride
While new car sales have plummeted due to the global shortage of semiconductors; it looks like the times are right for the used car industry. With used car sales exceeding new car sales, the market scenario for the used car sector looks positive.
According to the OLX Autos-CRISIL study, the Indian used car market is expected to grow to a size of over 70 lakh vehicles by 2025-26 from 38 lakh vehicles in 2020-21. “It grows by about 12 to 14% over the next few years. Used car industry expected to grow 15% in FY22, with COVID-19 pandemic, digitalization, shifting demographics and aspirations, first-time buyers and availability of financing options acting as engines of growth. “says the study.
In a conversation with SME Futures, Sumit Garg, MD and co-founder of Luxury Ride, said consumer aspirations for luxury cars are growing. But at the same time, he feels that the sector is still very fragmented and constantly changing. And new technological interventions such as Blockchain can help it organize better. It also highlights the need for regulatory provisions for this sector.
Luxury cars are no longer a far-fetched dream, how do you view the current market for premium car sales, in general?
In recent years, consumers have shown great interest in the used luxury car market with a reinvigorated craze for high-end cars, which explains the exponential rise of this industry. The sharp increase in demand for used cars is driven by a multitude of factors attributable to the pandemic, changing consumer behavior, digitalisation, the emergence of organized players, the increase in disposable income and the availability of financing options.
Additionally, the rapid rate at which urbanization is occurring is also a major factor contributing to the growth of the used luxury car market. Over the years, disposable incomes have increased, which has led to a change in consumer aspirations to upgrade to higher-end products.
Also tell us how big is the used luxury car sales market and what is its share in the overall sales figures?
According to a study by OLX-CRISIL Auto, the used car industry is expected to grow at a CAGR of 12-14% over the next five years, bringing the market size to over 7 million vehicles. here the fiscal year 26 3.8 million units it recorded in 2021. The used car market is showing a promising growth trajectory in recent years. While it recorded a growth rate of 9% between FY15 and FY21, it is estimated that in FY22 the sector will grow by 15-20%.
Perceiving these revelations as being in favor of this emerging segment, the used car market is expected to hit 8.2 million units per year by FY25, compared to 3.8 million units recorded in fiscal year 21.
According to a CRISIL report, sales of premium vehicles are on the rise, can you name the different reasons? Also, do you think used car sales exceed new car sales?
The automotive sector is a highly volatile industry and the changes that have taken place over the past few years have created the right market mix for the growth of the used luxury car market. The emerging millennial population as a potential consumer base has an incessant desire to own a luxury car, but at the same time, they are very wise and make an effort to maintain their financial stability. This leads many of them to strongly consider buying a used luxury car that is almost new and offers unparalleled performance at the price of an economical new car.
Looking at the trend of owning a means of personal mobility after the pandemic, the masses are heading towards the used car market. As the current used car sales in India are 1.5 times the new car sales, the luxury car segment will also see an increase in demand given the increase in disposable income and of the almost identical price range of second-hand luxury. cars and economy cars.
How has business evolved for Luxury Ride and how is the competition doing in the market?
In 2012 when we entered the market it was called Koibicar.com, but later in 2015 it was called Luxury Ride. In the early years, we struggled to get cars to show up at our first showroom in Delhi.
At that time, I asked my mentor and startup investor to lend me cars just for the purpose of displaying them in the showroom. But over the years, we’ve come a long way thanks to our passion for luxury cars combined with our perseverance and penchant for hard work.
Our second outlet in my home town of Karnal is India’s largest single location showroom so far with a 4 storey building spread over 1 acre of land with the capacity to display over 50 cars. Since then there has been no looking back for us and today Luxury Ride has seven showrooms across North India in New Delhi, Gurugram, Karnal, Ludhiana, Chandigarh, Jaipur and Dehradun.
The used car sales segment is still very loosely organized, even though there are automotive technology players such as your platform in the arena. Your thoughts on why the Indian market is so slow on this front.
Considering that the second-hand segment is growing at an exponential rate, to amplify its sales and services, there is an urgent need to converge its organized and unorganized assets for deeper market penetration. Currently, the sector is unevenly divided between organized, semi-organized and unorganized actors.
Although organized players are making inroads in the market, which has been hard felt during the pandemic, they still only account for around 20% of the market. This collaboration will help them expand their reach and at the same time improve their services. With the help of this association, organized players and even start-ups can take advantage of the strong network and notoriety built by local dealers over the years.
Even individual resellers can benefit from the merger by tapping into a larger pool of buyers who are looking for a seamless experience, more options and assured warranties, etc. On the other hand, organized actors can bring about the integration of advanced technologies such as Blockchain which can help in the proper storage and maintenance of complex information such as vehicle ownership, parts replacement and vehicle details. service history, giving an end-to-end overview of the actual condition of the vehicle. They can provide capital support to local dealerships to become more digitally proficient and help them create a seamless interface for their customer services.
What are the most important policy changes that this sector needs?
The used car industry has both online and offline players who act as intermediaries in transactions between buyers and sellers. These transactions take place through online platforms or in physical offices and garages and are mostly unorganized.
At present, there is no regulatory provision for these intermediaries, although they are at the center of used car transactions and exchange a car several times before it is finally registered in the name of the owner. final.
The government is really pushing EV mobility; do you think there will be a separate used market for them in the future? Do you explore it?
Considering that EVs are the future of the automotive industry, India is striving to become a premier EV nation by 2030. In India, the EV space is growing tremendously, and the government and automakers have invested in R&D and various products and services to prepare it for the future, but the reality is that it’s still in its infancy.
I think it will take a few years when it comes to the used electric car market. The need of the hour is to invest in the right technology and have a robust infrastructure to make India ready for electric vehicles. However, considering the government’s efforts to mainstream electric vehicles, the future also looks bright for the used electric vehicle segment.
How do you see the used luxury car market developing?
As stated above, the various changes taking place in the automotive industry are strongly working in favor of the used luxury car market. The segment is undergoing very promising changes.
Due to the pandemic, many organized players have emerged in the market which are driving the rapid digitization and advanced technological evolution of this sector. They spare no effort in achieving data monetization and in-vehicle connectivity. They offer a plethora of subscription options, rental facilities, recharge facilities and long-term maintenance packages to speed up the organization and growth of this sector.
This is a radical step in organizing this otherwise highly fragmented sector which will be very crucial in building trust among the consumer base that will lead to the exponential growth of this industry. According to industry experts, this digital transformation is expected to drive total sales growth for this industry from 20% in FY21 to 30% in FY26.
What are your future plans for Luxury Ride?
Currently, with seven outlets in the country, we at Luxury Ride are striving to increase our deeper market penetration and expand our presence across India. We plan to create 50 new showrooms in the next 4-5 years and during this expansion we also want to focus on diversifying our business. We want to establish Luxury Ride as a leader in the field of used car sales with our 360 degree solutions.