September 28, 2021

T-Viral

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As chip woes brake auto cos, used cars take off

Chennai: The used car market is enjoying a demand spillover, particularly for best-selling mass market models, as new car production continues to be affected by the semiconductor shortage. As a result, used cars have seen a 5-10% increase in prices and online transactions have surged by 25% on organised players’ platforms like Droom, OLX, Cars24 and others in the April-August period.
“We have seen used car demand shoot through the roof from April to August. In April, we did business of $130 million, which is now at $165 million. In terms of units, 7,500 used cars have now gone up to 10,000. Used car listings on our platform have increased from 900,000 in April to 1.1 million now,” said Droom founder-CEO Sandeep Aggarwal.

Most of the jump in sales is in bestselling models. “Between Q4FY21 to Q2FY22, sales of fast-moving models like Alto 800, Scorpio, Santro and WagonR on our platform have gone up 55%, 42%, 37% and 23% respectively,” said OLX Autos CEO Amit Kumar. This has also meant an increase in prices. “Prices are up 5%, but used cars are still bargain buys,” said Droom’s Aggarwal. “Price of best-selling models are up 3-10%,” said OLX’s Kumar.
Pre-owned car marketers say that the ongoing chip shortage in the auto industry — which has hit production ramp-up before the festival season — will further boost sales of second-hand vehicles. “Now that the auto industry is facing the chip shortage crisis, production will see a significant decline in the coming months. With the upcoming festive season and decline in production of new cars, the demand for pre-owned cars is expected to witness a significant uptick,” said Kunal Mundra, CEO of Cars India, CARS24.
New car dealers have already said that with stocks at around 25 days, the festival season will be lacklustre this year because car companies will not be able to produce enough. Used car inventory too has come down due to high demand — from 19.2 days in January-March to 18.7 days in July-September.