As the effects of the Union Budget 2008-09 slowly begin to trickle down, auto industry companies feel that there will be a surge in the number of buyers and sellers in the used car market. With the Budget granting them more disposable income, many would resort to buying either new or old cars.But the demand for used cars, on the other hand, will surge from both those who want to upgrade from two-wheelers to cars and from cars to new car models.
"Any price reduction is good for our business," said Vinay Sanghi, chief executive officer, FirstChoice Ltd, a dealer in secondhand-cars from Mahindra & Mahindra.
"Used cars will see prices fall by nearly Rs 5,000 to 6,000," he added. "In India, the equation between used and new cars is 1:1, that is, for every one new car bought, a used car is sold," said Mohit Dubey, chief executive officer, Carwale.com.
He added that the recent announcements in the Budget would result in a 5%-10% reduction in used-car prices. For instance, a car that costs Rs 2 lakh will now be available for Rs 1.8 or 1.9 lakh.
He added that the used-car market, which is as big as the new car market in India, is growing faster at the rate of 26% compared to 18% for the new car market. Despite expectations of huge sales, used-car dealers see their margins unchanged. "Now, used cars will be sold and purchased at cheaper prices. Hence, there will be no change in our margins," Sanghi and Dubey corroborated.
When asked if excise cuts would lead to people shifting focus from used-cars to new models, Sanghi said, "New cars will still be expensive and unaffordable for many. Further, this also opens opportunities for two-wheeler owners to consider buying a used car, if not a new one."
Finance minister P Chidambaram had proposed to reduce excise duty on small cars and two-wheelers to 12% from the previous 16%, following which several automobile companies slashed prices of their vehicles.
http://in.news.yahoo.com/financialexpress/20080304/r_t_fe_bs_budget08/tbs-used-car-market-may-surge-with-union-7435665.html
