India’s automotive market is undergoing a transformative shift as the demand for used vehicles rises dramatically. With a mere 15 cars per 1,000 inhabitants, compared to significantly higher figures in countries like China and developed economies, the country presents a fertile ground for the expansion of the used car market. In this story, we explore the factors driving this trend, from economic constraints and enhanced vehicle quality to the influence of digital platforms and AI innovations. Delve into the burgeoning market for pre-owned cars, two-wheelers, trucks, and agricultural equipment, and discover how technological advancements and changing consumer preferences are shaping the future of India’s second-hand vehicle industry.
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The passenger vehicle market in India is significantly under-penetrated, with only about 15 cars per 1,000 inhabitants, compared to 150 in China and roughly 350-450 in developed economies. This gap is driving the rapid expansion of the used car market. Pre-owned or used vehicles present a cost-effective solution for many consumers priced out of the new vehicle market.
In recent years, the used vehicle market in India has witnessed remarkable growth, driven by factors such as affordability, accessible financing options, enhancements in vehicle quality and reliability, and advancements in online platforms for buying and selling used vehicles.
According to a report ‘Used Car Market in India- Size & Share Analysis 2024-2029’, by Mordor Intelligence, the used car market size in 2024, is estimated to be at US$ 31.62 billion. By 2029, the market size is projected to reach US$ 63.87 billion, growing at a CAGR of 15.10% from 2024 to 2029.
The report noted significant growth in India’s used car market, while also highlighting considerable potential for expansion through the organized sector. This potential is underscored by the new-to-used car ratio of 1:3 seen in mature markets such as the United States and Europe. Overall, the Indian used car market is well-positioned for continued growth and development, the report said.
The market for used cars is set for a significant growth, fueled by increasing individual mobility preferences and expanded financing options. The financial strain caused by the COVID-19 pandemic has also sparked interest in used cars, underscoring the industry’s immense growth potential.
Interestingly, buyer preferences in the used car market are now mirroring those in the new car market, offering numerous options for first-time buyers. Used car buyers are also more open to considering new brands, a trend less common among new car purchasers. Additionally, the average ownership duration of new cars has dropped from 5-6 years to just 3 years.
Organized players like Mahindra First Choice, CarTrade, Maruti Suzuki True Value, and Volkswagen’s Das Welt Auto have fueled substantial growth in this sector. However, the report stated that in the long term standardized dealership practices, high pricing, and costly financing options for used cars could potentially hinder market growth.
As for two wheelers, the report ‘India Used Two-Wheeler Market Outlook to FY 2028’ by Ken Research projects the used two-wheeler market to reach 55.8 million units by 2027, driven by rising demand, urbanization, and increased disposable income. In FY2023, motorcycles accounted for 75% of two-wheelers sold.
The report highlighted a significant drop in new two-wheeler sales in the Indian automotive industry during FY2021 and FY2022, driven by the introduction of BS VI norms, which increased vehicle prices, and the impact of COVID-19 lockdowns. In FY2020, the growth rate of used two-wheelers also slowed as consumers held onto their vehicles longer due to higher new vehicle costs. However, sales rebounded in FY2022 and FY2023, driven by rising average household incomes and shifts in consumer purchasing patterns. It further noted that the organized market for used two-wheelers in India is consolidating, thanks to the involvement of original equipment manufacturers (OEMs) and two-wheeler dealerships. This consolidation has led to greater awareness and a growing preference for certified pre-owned vehicles.
(BikeDekho, BikeWale, OLX, Quickr are among the leading players in the online used two-wheelers market.)
Trucks play a crucial role in logistics, facilitating the long-distance transportation of goods and optimizing supply chains to reduce operational costs. The growth of India’s used truck market is driven by businesses and fleet operators seeking cost-effective transportation solutions. Demand is further boosted by the e-commerce sector’s need for efficient logistics, supported by online platforms that streamline transactions and expand market access. Stricter emissions norms and regulatory requirements are encouraging fleet upgrades, while recreational use of used trucks also contributes to market expansion.
IMARC Group in its India Used Truck Market Report 2024-2032, states that India’s used truck market is expected to grow at a CAGR of 4.9% from 2024 to 2032. Key factors driving this growth include rapid urbanization and industrialization, increasing demand for transportation services, especially for goods and cargo, the rise of online platforms and marketplaces, and an evolving regulatory environment.
The used tractor market is the leading segment in India’s used agricultural equipment market. States with lower average farmer incomes, like Uttar Pradesh and Madhya Pradesh, show the highest demand for used tractors, while Punjab and Haryana prefer new tractors. Recently, online sales of used tractors have surged, driven by the popularity of e-marketplaces, hybrid platforms, and classifieds in rural areas.
Despite this growth, the market remains fragmented and dominated by unorganized dealers, with peer-to-peer sales being common.
According to a report ‘Indian Used Agricultural Equipment Market Outlook to 2026’ by Ken Research, the Indian market for used agricultural equipment experienced significant growth from FY2016 to FY2021, with a CAGR of approximately 16.5% by volume and 19.1% by transaction value.
The used tractors dominated the market by volume in FY’21, followed by tractor-attachable equipment, power tillers, and harvesters. The growth has been driven by ambitious government initiatives, increasing mechanization adoption, and the economic feasibility of purchasing second-hand equipment in India. The report predicted that during the forecast period FY2022-FY2026, the market is expected to grow at a CAGR of 22.7% by volume.
Changes in emission norms, technological advancements, and higher commodity prices have driven up new vehicle prices. India Ratings and Research predicts vehicle financiers will focus on used vehicles due to affordability challenges for first-time buyers, driver-operators, and small transport businesses.
In the first half of this fiscal year, borrowers’ cash flows may suffer from high food inflation, heat waves, and a slowing rural economy. Vehicle operators transporting agricultural loads face decreased capacity utilization due to moderate food production growth in 2024. The production of kharif and rabi grains in 2023-24 fell by 1.3% compared to the previous year.
To boost commercial vehicle demand beyond single-digit growth for FY25, the rating agency highlights the need for better capacity utilization. Non-bank finance companies are expected to continue prioritizing used vehicles due to their favorable risk-return profile.
The tractor segment, essential for both agricultural and non-agricultural purposes, has seen sales declines post-pandemic, worsened by labor shortages and erratic rainfall. A potential increase in tractor demand relies on favorable monsoons, evenly distributed rainfall, and higher minimum support prices (MSP) across states to maintain asset quality and support farm incomes.
Growth of te second hand vehicle industry in the future is expected due to an expanding middle class, a young population, and increasing incomes in rural and urban areas. Shaped by factors like affordability, accessible financing, economic conditions, supply chain disruptions, technological advancements, and regulatory developments. The use of technology to make transactions simpler and more transparent is also likely to boost market growth. With more used vehicles becoming available, prices are expected to drop, creating more opportunities for buyers and sellers and strengthening the market’s position in India’s automotive sector.
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