Car penetration stays low despite passenger vehicle count reaching 35.9M in FY23: OLX Mobility report

India's passenger vehicle count reached 35.9 million in FY23, growing from 34.1 million in FY22, according to a report by OLX Mobility.

In FY223, the pre-owned car industry in India continued to outpace the new car market in terms of volumes, with 4.6 million pre-owned units sold compared to 3.9 million new cars.

"This growth was driven by factors like the market reopening, a growing preference for personal mobility, and a rise in disposable incomes," OLX said in a statement.

A similar trend was observed in FY22, when 4 million pre-owned cars were sold, surpassing the 3.1 million new cars. The pre-owned car market witnessed a compound annual growth rate (CAGR) of 6% during 2018-2023, outstripping the 3% CAGR observed in the new cars market during the same period.

Pre-owned versus new cars

New car sales achieved an industry value of Rs 4.5 trillion in FY23, up from Rs 3.5 trillion in FY22. However, despite achieving a 27% volume growth in FY23 at 3.9 million units, the segment anticipates a moderated growth pace of 6-8% in FY24, said OLX.

Despite leading in volumes, the pre-owned car market's worth in FY23 was Rs 2.1 trillion, significantly lower than the Rs 4.5 trillion value of the new car market. This trend was also seen in FY22, with the pre-owned car market valued at Rs 1.8 trillion, trailing the Rs 3.5 trillion valuation of the new car market.

The pre-owned car market is projected to grow 1.6x in volume terms, rising from 4.6 million units in FY23 to more than 8.5 million units by FY28, and 2.5x in value terms from Rs 2.1 trillion to Rs 5 trillion, over the next five years.

Urban centres dominated the pre-owned car industry in FY23, claiming a substantial 70-75% market share, while Tier III and rural areas contributed the rest. Limited stock availability in rural dealerships prompted many rural customers to travel to nearby Tier II cities.

The report underscores a shift in demand dynamics, emphasising the burgeoning interest in Tier II cities, driven by a younger demographic, which accounts for 40-45% of the demand.

On the supply side of pre-owned cars, organised dealers (players such as True Value and Mahindra First Choice), with showrooms and workshops, tied with unorganised dealers who lack such a setup. Both segments made up 30-35% each of the total market share in FY23. Digital platforms like OLX, Spinny and Cars24 accounted for 10-12%, while customer-to-customer transactions represented 22-24%.

On the demand side, organised dealers constituted 25-27%, unorganised dealers accounted for 48-53%, digital platforms comprised 2-4%, and C2C transactions formed 22-24%.

As per the report, the share of digital platforms in the pre-owned car market is projected to surge from 3-4% in FY23 to over 12% by FY28, marking a more than 4x increase.

"There is a very high need for organised players to create more consumer trust and win consumer love in the (pre-owned) market. There's a lot more that needs to be done by the industry in terms of shifting the market from the unorganised dealers to the organised place," Siddharth Agrawal, Country Head - Marketing, OLX India, told YourStory.

Car penetration

India's car penetration per 1,000 people remains relatively low at 24-26, trailing behind global counterparts such as China, which boasts 183 cars per 1,000 people, and the United States, which leads with 594 cars per 1,000 people.

Sri Lanka demonstrates a higher car penetration rate at 40 cars per 1,000 people, while Indonesia and Brazil have 60 and 276 cars per 1,000 people, respectively. Mexico, which has a total car count similar to that of India at 35 million, surpasses India with a penetration rate of 280 cars per 1,000 people.

"That's the kind of opportunity mobility as a category offers in terms of cars. Whether it's new, old, it doesn't matter. The space in itself offers a 10x growth potential in the medium to long term. Obviously, it's not a short-term journey because it's a function of your disposable income," said Agrawal.

Utility vehicles

The reports highlights a shift towards utility vehicles (UVs) which are reshaping the automotive landscape, particularly in the pre-owned car market. It predicts a surge in UVs, doubling market share from 21% in 2023 to 41% by 2028.

"The reason we see this massive demand is because they have a reliable after-sales service network, they have low maintenance and are high on mileage and fuel efficiency," said Agrawal.

Key models, including Hyundai Creta, Maruti Brezza, Ford EcoSport, and Mahindra XUV500, dominate the pre-owned UV segment, with newer entrants such as Tata Nexon and Kia Sonet gaining traction, according to OLX's proprietary data.

The influx of UVs has contributed to a decrease in the average age of available cars, driven by the faster replacement cycles observed among UV owners.

The report shows that demand is highest for UVs in the 5-7 years age bracket at 35%, followed by 0-4 years at 26%.

As more UVs enter the pre-owned market, the average buying price is expected to rise due to their generally higher price bracket.

OLX is a global online classifieds platform founded in 2006 in Buenos Aires. It quickly expanded into emerging markets around the world and entered India in the same year. CarTrade acquired a 100% stake in OLX’s classified and auto business in India worth ₹535.4 crore in August this year.

The OLX Mobility Report, formerly known as Autonote, delves into the transformative journey of India's pre-owned car market. Utilising CRISIL's market intelligence and analytics methodology, the report draws insights from key industry data and the OLX platform database, employing algorithms and calculations for conclusions. The report also includes insights from ground-level interactions with market participants, including dealers, OEMs, financiers, and insurance providers, according to OLX.