SUVs may be the new car king, but hatchbacks still lead the used-car market

New Delhi: While sport-utility vehicles (SUV), with a market share of about 50%, have led passenger vehicle (PV) sales in the first half of the current financial year (April-September), entry-level cars and hatchbacks continue to drive the used car segment market in the country.

Major automakers and industry experts that DH spoke to are in agreement that second-hand small cars and hatchbacks are now a more viable option for middle-income customers looking to graduate from two-wheelers to cars as entry-level car prices have gone up on the back of inflation, higher input costs and stricter regulations. 

“Prices of cars have risen over the past few years across categories. However, income levels among salaried classes may not have kept pace with the increase in prices,” said Shashank Srivastava, senior executive director of marketing and sales at Maruti Suzuki India Limited (MSIL) while speaking with DH at its South-Delhi headquarters.

He added that while the cost of meeting increasingly tougher safety and emission norms is the same across car categories, the price increase is felt more in the sub-Rs 10 lakh category.

Naturally, the customers looking for entry-level cars (sub-Rs 6 lakh) will be more price-conscious than those buying premium cars. 

“Average age of a used car is about 7.3 years. The used car market mix today reflects what was happening in the new car market 7 years ago, when SUV sales were not as much as today (about 16%),” explained Srivastava underscoring another prominent reason why entry-level cars like the Hyundai i10, Maruti Suzuki Swift and Renault Kwid dominate the second-hand car market in India today. Maruti Suzuki and Hyundai continue to be the major players in this space.

In the first half of FY24, new entry-level car sales witnessed a 41% drop while the share of hatchbacks also slipped to 30%, as per the credit rating agency (ICRA). This has led carmakers to now focus on the driving force of the auto industry- the SUVs.

Maruti, traditionally known for its small cars, has successfully transitioned into a leading SUV maker.  From having a meagre 12.6% share in the SUV market in FY23, it now commands 22%, after launching four new SUVs – new Brezza, Grand Vitara, Fronx and Jimny.

The pre-owned cars segment is also seeing healthy sales, making up for the widening price gap in the new car sales market for first-time buyers. The Indian used-car market size is expected to grow from $27.47 billion in 2023 to $55.49 billion by 2028, at a compounded annual growth rate (CAGR) of 15.10%, as per market intelligence platform Mordor Intelligence.

Spinny, a Gurugram-based used-car retailing platform, revealed that 63% of first-time car buyers are now moving into the pre-owned (or used) car segment, up 6% from a year ago.

By going digital, used-car retail platforms now provide easier access to the market along with readily available financing options. This coupled with an increased need for personal mobility and relatively lower cost of ownership is driving the popularity of used cars. Entry-level cars and hatchbacks are seeing the most hits on the platforms, while SUVs are slowly gathering traction.

India’s largest carmaker Maruti Suzuki, which is the leader in the organised used car segment with a 47% share, is looking at selling 5,00,000 used cars by the end of this fiscal from 4,00,000 in FY23.  So far, the company has achieved sales of 2,35,000 cars this year, Srivastava revealed.

From just about a dozen models and a market share of about 20%, the SUV segment now makes up half of all PV sales in India in the first half of this fiscal year, doubling its market share in five years. The sheer magnitude of cars available in the SUV segment, which is pegged at over 107 models, is a telling indicator of this trend. 

The craze for SUVs at present is such that waiting periods for some of the most popular models are stretching to upwards of two years while fresh orders continue to flow. This trend, as per experts, is expected to continue for the foreseeable future and more particularly this financial year.

However, some like R C Bhargava, MSIL Chairman, are bullish that the small cars segment will make a comeback, possibly in the next couple of years and hence they continue to focus growth projections for the segment in line with 27% for FY24, with even higher volume projections.