COVID Has Shifted The Balance In Favour Of Pre-Owned Cars For A Long Time To Come

OLX  Autos Outlook Business: Q&A 

Spokesperson - Amit Kumar, CEO, OLX Group

To understand the trends in India’s automotive market we spoke to Amit Kumar, CEO, OLX Group on the road ahead for pre-owned cars in India and how COVID brought about a fundamental change in consumer behaviour towards the same.  

Q1. Where do you see the trend of the growing popularity of used cars going in 2022? Has it slowed down? Has it accelerated further? 

Owing to the increased need for personal mobility, affordability, support from financers, and low new car penetration in India, pre-owned car sales are expected to reach 1.5x times that of new car sales over the next five years. 

A recent study conducted by OLX Autos with CRISIL on the pre-owned car market, reveals that by 2025- 2026, the Indian pre-owned car market will reach a size of over 7 Mn vehicles and outpace the new car market.

Q2. Going by the trends, which car models will be popular in 2022? Could you share some data on the most popular car bought and sold on OLX?  

Based on the recent trends, the top three brands being sold on OLX Autos are Maruti Suzuki, Hyundai and Mahindra. In terms of the car models, the top-selling ones include hatchbacks such as Swift, Alto and i10. In addition, SUVs such as XUV500, Innova and Scorpio are also gaining huge traction. The average selling price of used cars was up by approximately 17%-20% year-on-year from approx. INR 4 lakh in January 2021 to INR 4.8  lakh this January 2022. 

Q3. The current market environment has put a lot of stress on the supply of new cars – chip shortage, restricted availability of raw materials, and longer wait times. How will this impact the supply side of used cars? 

The demand for pre-owned cars is way ahead compared to pre-covid times.  There are multiple factors behind this growth, the sector supply crunch, the need for personal mobility, and the desire for upward mobility. While chip shortage, rising cost of new cars and longer wait times are slowing the new car market, the pre-owned car market is gaining momentum. 

As per our study with CRISIL, replacement demand this fiscal year made up only 19% of all new automobile sales, this typically ranges between 24-25%. This increase in demand is affecting the pricing for pre-owned cars, given their limited supply. This pressure on supply is also evident in the typical age of cars being traded which has increased from approx. 6-7 years during pre-covid times to approx. 8-9 years now.  

Q4. How does OLX Autos perceive the used car market in India which has many venture-funded startups operating in the domain? 

As stated the pre-owned car market will reach a size of over 7 Mn vehicles and outpace the new car market by 2025-26. 

We at OLX Autos believe that given the per capita car ownership in India (23-25 cars per 1000 households as compared to 900+ per 1000 households in the US) is still amongst the lowest in the world it continues to be an aspiration for most Indians.  

This unorganised industry is growing and therefore disruption is bound to happen. Startups are poised to take advantage and create that disruption to provide the phygital customer experience that customers are looking for. Ultimately, the player with a differentiated customer experience will succeed. 

Q5. Tell us a bit about the recently launched home inspection model. How comfortable are users to sell their cars from their homes? 

Pre-covid, most of our business (90%) was an in-store experience. However, during Covid, this was impacted and we created a new way of serving our customers. We pivoted to a model best suited to the customer preferences in terms of safety and convenience to meet the consumer-led demand. 

Even though we are back to normalcy, consumers are preferring to take advantage of our  home inspection facility which is witnessing a rapid growth 

Q6. What has been the growth witnessed by OLX Autos in the last 2 years with the inclination towards personal mobility due to the pandemic-driven growth of the pre-owned car market? 

OLX delivered a strong performance for the year, as it expanded its direct-to-consumer autos transactions business. Revenues increased 93% to US$3 billion. OLX Autos contributed significantly to this growth, with a revenue of US$1.6 billion, up 173% YoY. OLX Autos scaled operations significantly, with a record 175,000 autos transactions, up 79% from the previous year. Our core Classifieds business recorded growth across key markets, with monthly app user base rising 7% to 124 million, active listings growing 11% to 174 million and monthly paying listers increasing 10% to 4.1 million, as per a report on the global figures by Naspers.  

Q7. How is OLX Autos reinventing itself to keep pace with the competition and changing consumer preferences?  

OLX Autos is reinventing itself as a one-stop destination for anyone that wants to sell a pre-owned car, while also catering to the largest traditional dealer network in this space to help them grow with a wide variety of technology solutions.  

Some of them being - 

• Home Inspection Model 

Q8. With many OEMs entering the used car space with their own branded outlets, do you see this as an opportunity or a hindrance to your plans in India? 

This space is too large for any individual player to dominate in a market that is still 90% unorganized. We believe the more the players, the easier it will be to drive awareness about the various channels to sell cars and raise the bar for customer experience. In the past, we have demonstrated that despite the competition, we were able to achieve tremendous growth. This market will grow at a CAGR of around 15% over the next 5 years to reach over 7 mn which leaves a lot of room for growth hence the real battle is about understanding the needs and preferences of the consumers, creating awareness around better platforms that provide a differentiated customer experience. 

We are focused and driven to provide great customer experiences that create positive word of mouth for our brand. This is an investment phase for us where we are building the right products, solutions, and capabilities that are scalable.