Used car market sees rising demand as semiconductor chip shortage hurts new car supply

1 month ago 26

India's automakers are present facing terrible supply-related issues owing to the ongoing semiconductor spot shortage aft witnessing a crisp V-shaped betterment of astir 140% successful April-June 2021 arsenic compared to 2020, an aberrant twelvemonth for the industry. Experts are of the sentiment that factors similar emergence successful input costs and commodity prices resulting successful longer waiting periods, on with meagre festive-season discounts, could adversely interaction user sentiment for months to come. But for the utilized car market, these developments person travel arsenic a metallic lining. Especially astatine a clip erstwhile carmakers similar Toyota, Hyundai, and Mahindra & Mahindra person already announced that their cars are going to outgo more. Country's largest carmaker Maruti Suzuki has besides announced terms hike for the 3rd clip this calendar twelvemonth itself. The waiting periods for car models are much than 2 months, and could adjacent widen up to 7 months for models successful demand.
 
"The utilized car request has been accelerated owed to spot shortage and agelong waiting times to get the caller cars. We are seeing astir 3 times the fig of inquiries from past 4 weeks oregon so. There is nary interaction owed to substance prices," said Umesh Hora, CEO - Used Car Business, CarDekho.
 
The Federation of Automobile Dealers Associations (FADA) is of the sentiment that though the booking for rider vehicles is high, but the manufacture is not capable to fulfil that request owed to agelong waiting periods caused by semiconductor spot shortages. "Unlike past twelvemonth erstwhile request was a challenge, this clip proviso is becoming a bigger occupation owed to the shortage of semiconductors. The waiting play ranges from 2-3 months to arsenic precocious arsenic 12 months for definite models and variants. We are trying to archer customers to publication arsenic aboriginal arsenic imaginable due to the fact that determination is simply a precocious accidental that they whitethorn not get deliveries connected the circumstantial dates they person successful mind," Vinkesh Gulati, President, FADA, said. "There is nary respite yet connected the semiconductor shortage and it whitethorn instrumentality different 4-5 months for things to commencement stabilising and proviso to normalise."
 
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However, it's not similar the utilized car marketplace is wholly immune to planetary supply-side constraints. Even though the request for utilized cars has increased, Hora admits that adjacent this marketplace is facing constraints. "At macro level, the utilized car marketplace is besides witnessing constrained proviso to immoderate grade arsenic radical are not selling cars since determination are agelong waiting times for caller cars. However, the aforesaid is not affecting america arsenic we had created important inventory levels earlier festive seasons to conscionable the accrued demand," helium said. "We are looking guardant to seeing bumper festive play for our utilized car business." The institution said that it is moving to grow its catalog to implicit 10,000 cars successful the adjacent future. After raising $250 cardinal successful its Series E backing circular led by LeapFrog Investments past week, the 14-year-old Jaipur-based start-up attained the unicorn status. The institution has a catalogue of much than 3,000 certified pre-owned cars for online purchase.
 
Cars24, 1 of the largest players successful the market, points retired that there's a large usage lawsuit for utilized cars successful India wherever determination are 2 cars per 100 people. "It's an affordability issue. We are allowing radical to ain a car," Vikram Chopra, co-founder and CEO, Cars24 told Business Today.
 
The Gurugram-based steadfast boasts of a enactment of 20,000 cars and is valued astatine $1.84 billion. Chopra said that conscionable similar the caller rider car market, he's seeing a accordant maturation successful request successful the utilized car space. "The second-hand car marketplace is derivative of the superior market. Everything that happens successful caller cars impacts the utilized car market. It whitethorn beryllium with immoderate lag. For example, each the terms increases that are being taken successful the caller car marketplace successful the past fewer years, that volition commencement impacting the pre-owned car marketplace from adjacent year," helium said.
 
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The proviso for caller cars has taken a deed this festive play but it hasn't affected the pre-owned car marketplace arsenic badly. "On the contrary, this is creating a beardown request for pre-owned cars arsenic they are much affordable. We are seeing a beardown maturation this period starring to Diwali," Chopra added.

India's utilized car marketplace was valued astatine $27 cardinal successful 2020, and it is expected to scope $50 cardinal by 2026, registering a CAGR of 15 per cent, according to Mordor Intelligence. The assemblage contiguous is highly fragmented and unorganised arsenic a clump of Indian start-ups similar CarDekho, Cars24, Droom, Spinny, and CarTrade, etc. are competing for the larger stock of the pie.
 
"Definitely, the utilized car marketplace is witnessing a large roar currently. There are respective important maturation driving factors similar the impulse for idiosyncratic mobility owed to the on-going pandemic and planetary semiconductor spot shortage resulting successful longer waiting periods. In the past mates of years, we person witnessed a surge successful e-transactions connected online utilized conveyance platforms, giving a monolithic boost to the ecosystem," said Amit Kumar, CEO, OLX Autos India.
 
Kumar agrees that determination so is an upswing successful request for the utilized car market. "Whenever determination is an economical downturn, radical gravitate towards pre-owned goods arsenic they are cost-effective. Between Q4 FY21 to Q2 FY22, income of fast-moving models similar Alto 800, Swift, Scorpio, Santro, and WagonR person gone up connected our level astatine a promising rate," helium said.

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