What's Driving the Luxury Car Industry?
With the pandemic taking a turn, the luxury car industry is growing at high speed! What's driving this? Read on.
Cars are not just a mode of transportation that help you move from one place to another. For some, it’s a status symbol: something that makes them feel confident.
But, owing to the high prices of luxury cars, not many people can afford them. Sometimes the tax of importing a supercar is as high as the car itself (that’s a 100% tax rate!?). So, there is a cheaper way to own a luxury car...
A used luxury car.
It’s a win-win for both buyers and sellers. Buying a used luxury car gives you ownership of your dream car at a much cheaper price and in conditions as good as new. And, this market (of pre-owned, used luxury cars) has been gaining momentum!
The advent of Covid-19 restricted the supply of new cars and there was a shift in consumers’ demand (no one wants to travel in shared vehicles, especially our economic elites) that contributed to the growth even more.
In fact, automotive executives say that the new car market is estimated at around 30,000 units a year, as compared to around 60,000 units a year for used luxury cars! The country head of Mercedes-Benz said that the ratio of used cars to new ones is 1:4 - 25% of all its car sales come from used cars.
Audi India’s pre-owned car programme has registered a growth of over 20% over the last couple of years. Balbir Singh Dhillon, head of this programme, says that this business also gives them revenue from those who would only otherwise dream of buying a luxury car.
The used-car market is estimated to be pegged at 71 lakh units by 2025 (currently at around 40 lakh units), as per a report by Mahindra FirstChoice.
These statements by luxury brand officials highlight the importance of the used luxury car industry. In fact, such is the demand, that these brands are facing a supply constraint for the first time. If there was sufficient inventory, this business could have grown by a whole 100% instead of the actual 30%!
But, who are exactly the customers of this segment?
People who want luxury, but are being frugal too, given the pandemic.
The segment looks very promising. Except, there’s one problem…
People want security. They want authentic certifications and a warranty, which only the organised market can offer. Hence, the current Indian market is seeing a shift towards organised sellers as sales continue to increase.
Doesn’t all of this look like a competition between used and new luxury cars?
Probably, it isn’t. While both the segments are fighting over getting a larger piece of the pie, the pie itself is getting larger!
Buyers of luxury vehicles usually end up selling them after 2-3 years (to upgrade to a brand new model!), and this is how both the segments are growing at the same time. The demand for pre-owned luxury cars is growing at a rate of 35-45% year-on-year basis. So, is a used luxury car a smart choice?
Frankly, we don’t know. They sure are cheap to buy, but not without hidden costs. Owning a luxury car calls for high maintenance and repair costs. The choice is yours.
What do you think, will this used car industry continue to grow? Or will we go back to splurging post-pandemic?