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Final Year Project Work

Topic: Competitive Scenario of used-car

Industry and Consumer Perception of
used-car purchase in India

Project Report submitted in partial fulfilment of the

requirements for
the Degree of Master of Business Administration

Submitted by:
Tapish Panwar
MBA FT, F-145
FMS, Delhi

Final Year Project Work

Topic: Competitive Scenario of used-car
Industry and Consumer Perception of
used-car purchase in India

Project Report submitted in partial fulfilment of the

requirements for
the Degree of Master of Business Administration

Submitted by:
Tapish Panwar
MBA FT, F-145

FMS, Delhi

This is to certify that this final year project submitted in partial
fulfilment of the requirements for the Degree of Master of Business
Administration by Mr. Tapish Panwar at Faculty of Management Studies,
University of Delhi is a record of original research work carried out by
him under my guidance. Any material borrowed or referred to is duly



Tapish Panwar
Dr.Ajay Pandit

Roll No. F-141

Faculty of

Management Studies
MBA FT, 2011 2013
University of Delhi


I wish to express my heartfelt gratitude to Dr. Ajay Pandit for not only
being immensely helpful during the course of this project, but also for
the wonderful lessons he imparted in various aspects of marketing
during my two years of education here in FMS.
I am also indebted to the faculty members of FMS, Delhi for their
continuous support and help. I thank the staff of this great institution
for their support in making all possible facilities available for pursuing
my interests. I am thankful to my friends and batchmates for their
continued support and constant motivation.
I have learnt from several articles, research studies and papers from
national and international entities. I acknowledge the value I have
received from these bodies of knowledge.
And last but not the least; I would like to thank the dealers who I
contacted from the organized and unorganized format of used-car
industry and every single respondent for being patient and cooperative
with my data collection exercise.

Tapish Panwar
MBA FT, F-141
FMS, Delhi

Table of Contents
Executive Summary.................................................................................................... 6
Introduction................................................................................................................ 7
Methodology............................................................................................................. 11
Indian Auto Industry................................................................................................. 12
Indian used-car Industry........................................................................................... 20
Major Factors affecting segment growth...............................................................21
Drivers and Challenges......................................................................................... 23
Literature Review..................................................................................................... 25
1. Evolution of Indias used car industry................................................................25
2. The Anatomy and Physiology of the Used Car Business....................................28
Objective of the Study.............................................................................................. 31
Scope of the Project.................................................................................................. 32
Limitation of Project.................................................................................................. 33
Questionnaire Design for Data Collection.................................................................34
Research Process...................................................................................................... 34
Hypothesis................................................................................................................ 37
Hypothesis 1......................................................................................................... 37
Hypothesis 2......................................................................................................... 37
Hypothesis 3......................................................................................................... 37

Hypothesis 4......................................................................................................... 37
Analysis and Findings............................................................................................... 38
Organized Format.................................................................................................. 38
OEMs in used-car Industry..................................................................................40
Non- OEMs in used-car Industry.........................................................................51
Unorganized Format.............................................................................................. 56
Consumer Perception of used-car purchase in India.................................................61
Hypothesis Testing................................................................................................ 61
Qualitative Analysis............................................................................................... 61
Summary............................................................................................................... 61
Scope of Future Study.............................................................................................. 63
References................................................................................................................ 63
Annexure.................................................................................................................. 63

Executive Summary
I would like to thank

..From the singsong rhythm of the bullock cart to the jet air India has travelled a
long way. It was in 1898 that the first motor car rode down Indias roads and until
the First World War, about 4000 cars were directly imported to India from foreign
countries. The Hindustan Motors was set up in 1942, to manufacture automobiles in

International Journal of Engineering Sciences and Management, Apr-Jun 2012

A car-purchase has always been an aspiration decision for the customers. In India
purchasing a car is a long cycle for the customer. Though the cycles have a wide
range from being short for customers who have been buying cars every now and
then, there are thousands of them who purchase a car after very careful and
deliberate discussions and find their entry into this elite group.

Gone are the days when the customers had to queue up and wait for months and
sometimes years before they are the proud owners of their cars. Gone are the days
when the customers had to choose the only available option for a car or at best
from the only available 2-3 models.
Times have changed and automobiles have crawled into the lives of people who
would once only dream about having a car when they retire. For a considerable
chunk of people now, life without automobiles is not just difficult but to an extent
unimaginable. Looking at the number of passenger vehicles being sold every year, a
country might enjoy the economical progress it infers from the automobile growth
story, another aspect to this story is the individual progress. As mentioned, owning
a car for the larger chunk among the car owners is still an aspirational purchase.
Along with the functional attributes that a customer enjoys on purchasing a car, he
also looks forward to the prestige and esteem that comes along. Of course the idea
of owning a car disburse into the society the success that the individual has
achieved and wants fellow-people to know.
With all the hue and cry of the growing auto market in India and the OEMs, Indian
and International vying for consumers attention to their cars, there is race between
the auto players to be able to attend to the customers requirements and how they
can cater them well with their offerings as compared to that of the competitors.
When India was liberalized and foreign auto manufacturers were allowed to set
shops in India, though collaborations and then on their own, the market was thrown
open to competition and consumers soon were spoilt for choices. But who were
these customers? Were all the customers that the OEMs were targeting ready to pay
the prices which were still high and intimidating to a large chunk of aspirants to
enter into the elite four-wheeler owner group? The answer was NO.
Owning a car was always known to be a rich mans game. But their were other who
also wanted to be the proud owner of the four-wheeler but fell short of the mark to
make it to the elite group. This led to the rise of selling of pre-owned cars in India.
The market was completely unorganized without formal structure, ways and
mechanism for the cars to be sold and then bought by customers.

This however, brought into existence the pre-owned car industry in the country.
However, since the queuing up for the news cars and the availability of the old cars
which were to be sold was still challenging, the industry for pre-owned car never
took off the way it could have been. Another reason was the fact that since the new
cars supply was less than the demand and they were not available easily, even the
old cars attracted huge brand equity and hence they were not sold at a high
difference from the new cars. This meant that the old cars were not cheap either
and hence a new market was not tapped which was waiting to be.
Things changed when the liberalization hit India and lot of international players cam
and the Indian companies like Tata Motors and M&M started to fly as well in terms of
their productions and offerings. The demand supply gap started to dilute and soon
there were lot of cars. There were cars for people to afford.
The customers were spoilt for choices. When the new car market started to fly, so
did the pre-owned car market. The reasons were simple More new cars were sold
and hence there were more pre-owned cars to be sold. The large number of preowned cars for sale meant that the brand equity for pre-owned cars was not high
anymore either. Hence, the price difference between the old and new cars shot up
leading to a strengthened customer penetration and creating new markets and
customer sets for the pre-owned cars.
The changed market scenario saw new players entering into the market every now
and then. However, it remained to be a forte for unorganized players and the buying
and selling structure remained largely informal. It was not until Maruti started its
true value initiative to give a forma structure to the pre-owned car market. The
effect was almost immediate on the counterparts with Tata Motors, Hyundai and
other following the suit.
The challenges faced by the organized players however, were very different than
that of the ones which were faced by the unorganized sector. For example the major
challenges and threats that are faced by the organized players were related to the
areas like higher pricing justification, Lengthy procedures for owning the vehicles,
buying the vehicles and hence associated costs bored by them etc. However, they
do enjoy the benefits like higher trust and higher stock availability for customers.

On the other hand the unorganized players have problems in making their pitch
credible to customers. They also do not have the funds to own vehicles and hence
cannot command that among customers. Of course the bigger problem is getting
hold on the right vehicle at the right time without investing money into it. However,
they do have benefits to offer like competitive pricing and personal relationships.
Once the formal structure had come into being, the pre-owned car market was
expected to fly but it did not. It was since an important link was not made party to
the growing and strengthening structure, formal and informal, for pre-owned car
market. It was the customer. The customers had always been apprehensive about
buying pre-owned cars for a multiple reasons which we will discuss in details in
coming sections. However, the major apprehension lied in the authenticity of
documents and quality of the vehicles that were sold by pre-owned car sellers.
Since the category was established by the unorganized players which had informal
structure for selling cars, the mechanism and credibility were both dubbed dubious
and sometimes sham-ful by the prospective customers.
The customer had to be shown the value of the purchase decision which is a mix of
functional and emotional attributes. It was clear, the customer was never educated
about the category and how he can be serviced by it.





Reasons were simple, a lot of people had started to get into the car-owners group
and the supply was not ample. This gave bargaining power to the unorganized
players and they started to exploit and at occasions cheat customers. Since the
demand was still high nobody bothered much about the important factors like
customer relationship and trust building. It was until the demand supply again
started to get balanced when the importance of these factors was acknowledged by
the unorganized players and a relationship based selling started. It was not long
since then that the big players like Maruti, Tata, M&M forayed into this fast growing
market and set the processes.The apprehensions of customers started to get
addressed and the customer was back to be the king. Formal and organized players
offer their own set of benefits to the customer with a surcharge which was accepted
to some while not to all. Hence, insipite of all the hunky dory expectations and
estimates, the organized sector in pre-owned cars has not been able to break the
10% barrier. The reasons are again aplenty and we will look into them in detail in
coming sections.
The perception that the customer have for the pre-owned car industry is mixed.
Customers do acknowledge the benefits of buying a pre-owned car and buying it
from a particular format, organized or unorganized, but they are also apprehensive
of the deals that are offered to them in the pre-owned car market.
The perceived risks by customers associated with the purchase of a pre-owned car
are higher than that of the new car.

Financial - Medium
Social - High
Functional - Medium
Physical - Low
Psychological - High

High social and psychological risks stems from the realization of the fact that people
may associate the person with second-hand car which may not serve the aspiration
value which is usually the bigger reason for purchase of cars.Overall, the pre-owned
car market is in a very interesting position in the current scenario for a number of
reasons like dwindling sales of new cars, entry and growth of organized players,
changing perceptions about the pre-owned car, demographic, social and economic
changes in the population.

Since the objectives are diverse in terms of overall impact, a multi-pronged
methodology has been followed to achieve parts and sub-parts of the objectives.

Setting up Objective
o Study competitive scenario of used-car Industry
o Understand consumer perception about the used-car purchase in India

Finalizing Approach
o Multiple data collection techniques
o Theoretical Frameworks
Competitive analysis frameworks
Consumer perception
o Information Required
Dealer Information
Organized and Unorganized Format
Consumer Information
Perception on used-car purchase and market

Research Design and Data Collection

o Primary Research
Personal and Online
Dealer survey (Organized and Unorganized format

Customer Survey
Secondary Research
Organized players official websites
Research Reports
Academic Journals
Related Review, Blogs and Reports

Data Analysis and Findings


Indian Auto Industry


Indian Auto Industry has been a sunshine sector in the Indian growth chapter, until
recently when the growth started floundering due to many reasons. However, we
take into consideration the golden period of auto industry in the last decade for the
course of this project and hence, this report.
Though auto sector comprises of multiple segments and sub-segments we will
concentrate majorly on the passenger vehicles. A quick look at the segments of
auto sector will give us the following four major segments.

Passenger Vehicles
Commercial Vehicles

Two-wheelers segment is the biggest segment with almost three quarter of the total
share. An estimated 3 million passenger vehicles cars are sold every year, 2.5
millions of which are passenger vehicles and the rest is the fastest growing and the
sole grace of automotive growth in the past few months, the UV segment. Though
the share is small but this is the segment which has been keeping the growth story
of auto sector from being subdued dramatically.
The Indian customers have mre options than they every had in terms of the car
manufacturers, the country or continents these cars are manufactured in, the
engines built, the models, price points etc to choose the car they want to own. But
the scenario was not always the same.
In the first stages of the development, the Indian automobile industry was largely
relying upon the foreign technology which was a major dependency foe the industry
to survive.
However, thereafter the Indian manufacturers have started to spend heavily on
research and redesign which allowed them to reach several milestones in terms of
newer technologies their over the years. This allowed them to deploy these newer
innovations and technology into their vehicles. Premier Auto back was first
producing cars in India in the year 1946. Hindustan Motors, during that time
concentrated majorly on auto components. They came up with their first car in
1949. However, it was in 1980s that the Indian car Industry witnessed and
unprecedented resurgence. This was due to the entry marked by Maruti Udyog

Limited. Later opening up of the sector for foreign manufacturers also led to the rise
of this sector. The Indian auto industry since then has seen multiple innovations and
customer centric approach has been the word in the industry. Be it the first Indian
car manufactured with indigenous technology, Tata Indica or creation of a mini
segment by the worlds cheapest car Nano which was introduced at an astonishing
price of Rs 1 lac as promised by Ratan Tata, the then chairman of Tata Group.
The rising of auto sector could not have been just due to the changing technologies
and innovations in the industry if there was no market. Hence, the rising customer
base was the biggest reason which has led to this phenomenal rise of auto industry
in India.

er A

utoIndsry N

t R

The Indian auto sector(combined) have standings for multiple segments it caters to.

Largest three wheeler market in the world

2nd largest two wheeler market in the world



passenger car market in Asia & 10th Largest in the world

tractor market in the world
commercial vehicle market in the world
bus & truck market in the world

The share of various segments in auto industry is depicted in the given figure

Source: Confederation of Indian Industry


Source: Confederation of Indian Industry

Source: Confederation of Indian Industry


As per a presentation by Maruti Suzuki Ltd on the Indian Auto Industry, India is
turning out to be a new global hub for the manufacturing of cars by international
and national players. Most of the players are not looking at India not only as market
but also to be their preferential manufacturing hub to produces cares that can be
sold not only in India but to other emerging markets as well. There are multiple
reasons for this

SEZ and policy concessions for manufacturing operations

Cheaper labour cost
Increasing R&D facilities made available
Rise in skilled professional in auto industry
Expected rise in the consumption pattern in auto sector in coming years
Proximity to China, one of the biggest market which has started to turn some

investors away due to complex regime

India being hub for small and compact cars can be a production hub for
emerging markets

Government has been making efforts from its side as well to help India turn into a
manufacturing hub for auto Industry.
A recent news report from Indian express said that government is conducting a
mid-term review of the Automotive Mission Plan (AMP) 2006-16, which envisages
India to become a global hub for design and manufacture of automobiles. The
extrapolation that have been drawn clearly indicate that the output of the
automobile and auto component industry would reach $145 billion by 2016, which is
10 per cent of the Indias GDP
The Indian automobile industry has grown over the years since the announcement
of the AMP in 2006 when the overall production of vehicles rose from 9.7 million
units to 20 million in 2011-12. It is also evident that India is getting converted into a
global hub for manufacturers across the world.


Source: Indian Auto IndustryThe way forward - Mr.Sunil Kakkar , General manager(Supply
Chain), Maruti Suzuki India Ltd.

Some of the other figures which affirms Indias stand as a growing manufacturing
power house of automotive industry globally are as mentioned below

The Passenger Vehicle market of India will even cross Japan by selling about 5

million Vehicles by 2017-18

The Indian auto exports will be upto $5.62 billion in the year ending March

2011 and the same will grow to $17.64 billion in 2015-16

Indias share in global auto exports may also triple by 2016.
Indias passenger vehicle production projections :
o In 2010 2.6 million Vehicles
o By 2015 5.1 million Vehicles
o By 2020 9.7 million Vehicles



Current Scenario of Auto Industry

The below figures shows the category growth under the auto sub-segments and
passenger cars.

Source: JP Morgan India Auto Industry, Jan 2013

Since it will be interesting to note that which are the OEMs which have forayed into
the used-car sales players in organized format, we will not see how do these players
actually stand in their primary business, which is to sell new cars.
Maruti Suzuki remains to be the market leader which unassailable lead. Selling
almost 100,000 cars every month with the next player being Hyundai with average
monthly sale to be around 60,000, it is clear that Maruti Suzuki is sitting at the top.
The Auto industry has been taken by storm with the impressive growth of UV
segment. Obviosuly, Mahindra and Mahindra with its table consisting of mainly SUVs
have gained most. Tata Motors have been the biggest loser in terms of market share
in all the front, the UVs, PVs and even in its forte, the commercial vehicles.


Source: JP Morgan Indian Automobiles Sales Tracker, Jan 2013

Source: JP Morgan India Auto Industry, Jan 2013

Indian used-car Industry

Current Scenario
The Indian used-car segment has been growing at a faster pace than that of the
used car segment. The user-car segment also caters largely to the middle class
which is the fastest growing population segment in the country.
When the Indian new-cars industry got hit by the recessionary factors and the sales
growth were largely flat, the used-car market showed an exemplary resilience
towards this slow down and went on to reduce the gap with the new-car segment.
While the new car market showed negative growth in the past few months, used-car
market has been growing at a pace of 22% year by year. The current Indian usedcars market is pegged at around 2.5 million units a year. The Industry is said to be
worth around Rs 52,000 crores. (Source: Crisils report on used car industry.
Secondary Source:
The Industry grew at 20%+ rate for last 5 years bringing the industry from 1 million
unit per year to 2.5 million units per year. Even higher growth is expected from the
industry in coming years till FY2017. This is because the usedcar market has shown
strong signs of growth inspite of a dwindling overall auto sector in the country. The

coming years are expected to bring respite to the new-car sector and used car
sector is expected to grow at a higher rate based on historical data.
Mr. Nagendra Palle, CEO, Mahindra First Choice Wheels, the used car business of
Mahindra & Mahindra mentioned in a press release that the ratio of used car sales
to new car sales is about 1.5:1 currently which is still almost half to that of US and
hence there is lot of scope for growth and opportunities are aplenty
He also expects the total sales volume of used-car sales to be upto 7.7 million units
per year by 2017.
In 2007 when the used car market was trying to catch up wits its big-brother that
time, the new-car sales market, it managed to sell 1.4 million units while 1.7 million
new-cars were sold.
The figure was still low as compared to global standards for the used car versus
new-car sales. For example, by 2010 when the ratio of new cars to used car in US
was about 2.8:1, India was still at around 1:1. The opportunity and scope were
quickly picked by the OEMs and they aggressively went on to reduce this gaps by
expanding their franchisees for used-car sales.

Source: Research on India, Used-car Market study + used car market figures from
related news

Major Factors affecting segment growth

Though the used-car segment has faces some major problems in past which
checked it growth, like higher interest rates (interest rates for used-cars are
typically 3-5% higher than that on the new-cars. Another problem is the financing
routes, not many banks or financial institutes wanted to take up the used-car
market for financing initially, though late r the scenario changed. ICICI Lombard,
Kotak Mahindra started to finance the vehicle sales for used-car vehicles and the
other financing institutes soon followed the suit as ignoring a market that was
growing at almost 20%, much higher than the new-cars market was growing at less
than 10%.
However, as the interest rates went down and more and more firms were there to
finance these deals the difference in the sales volume per year between he used
cars and new cars kept on diminishing.
Some reports places the Indian automobile sector as the sixth largest market in the
works and is ranked as one of the fastest growing markets for the passenger cars.
This means that the people are increasingly buying cars at a faster rate than they
were earlier. It also means that lot of people are upgrading from their existing
vehicles. Hence it can be safely inferred that a lot of people will be having cars
which they would want to replace with a higher segment car and hence the one that
they hold needs to be sold. This is a very significant reason why the sale of usedcars has zoomed past the new-cars sales since the used-car sales is contributed by
the first time buyers as well as the buyers who want to upgrade to a newer car and
hence have to get rid of their existing car. Having deciphered this algorithm of the
used-car market, a bigger chunk of the OEMs that are based in the country are
working hard to ensure that no stone is left unturned while trying to entice the
prospective buyers. This in turn is resulting into expansion spree for their pre-owned
car stores through franchise or owned model.
Apart from this, another important reason is rising aspiration among the middle
class and the need to identify themselves as Arrived class. Owning a car is one
way to do that. But spending 4-5 lacs to buy a car to accomplish this may not be the
logical thing in terms of financial risks involved and hence they want a less
expensive alternative to achieve that. A used-car fits the bill perfectly. The rise of


middle class of India has been phenomenal and hence there is little apprehension
about this segment is going to contribute the used-car industry in India.
As per a report in HinduBusiness line, Rising disposable income has also induces
various social and psychological patterns among individuals which in one way or
other has contributed to the growth fo the used-car segment. For example, the
average replacement years for a car have gone down to 5 years from an average 12
years earlier. This means that customers who have bought a vehicles are coming
back to upgrade, change or sell a vehicles more often than they earlier used to. This
has also brought a huge supply as well as demand for the used-cars in the market.
Of the total used-car market in India currently, close to 50% is customer to
customer. This means that 60% of transactions happen between the buyer and
seller and no third party is involved.
Another bigger chunk is the brokers which accounts for around 24% of the total
deals while only about 16 % of the total markets falls under organized format of
used-car industry in India. (Source:, CRISIL Auto India Report
features in ,

Drivers and Challenges

There are multiple factors that acts as drivers as well as challenges for the used-car
industry. The major drivers that have led to the growth of the industry are related to
the OEMs entry and Demographic changes leaded to changes in customer segment
and penetration.
OEMs do realized that the growth of used-car industry in India is an important
avenue to tap but what is also important is to keep the brand creation and
expansion through new-car sales on its way as well. Hence, along with managing a
foot step in the used-car industry, OEMs are also ensuring that they close the bridge
between a used-car price and new-car price as much as possible. This is being done


by introducing small and compact cars which are Indias most successful car models
and are priced very competitively.

There are however other factors related to the external environment(Economy,

Social and Regulatory) which does play important roles in leading the sector
towards a particular direction.
The below chart gives a picture of how the automobile industry is segregated into
multiple segments and where does the used-car segment finds itself placed. Further
details on the industry players for used car segments will be furnished later in the


findings and analysis section.


Literature Review
1. Evolution of Indias used car industry
by Jagdish Khattar
Chairman and managing director, Carnation Auto
Indias automobile industry is one of the fastest growing in the world and it is
already the sixth largest globally. According to a SIAM report, annual car sales could
reach 5 million vehicles by 2015 and more than 9 million vehicles by 2020. Fastgrowing pre-owned car market Till about a decade ago, in the absence of organised
players, more than 60 percent of all used car sales were C2C (customer to
customer) among friends and relatives, with a Circle of Trust. The remaining sales
were managed by local unorganised dealers. In 2001, Maruti became the first major
organised player to enter the market with the launch of its used car brand Maruti
True Value. Today, the Indian consumer has woken up to the positive value equation
of pre-owned cars, and rightfully so. Pre-owned cars give higher flexibility and reach
to prospective car owners, whether first-time buyers or repeat, due to the price
advantage they offer. The economical prices of pre-owned cars help all types of

First-time car buyers: Lower price point and wide variety ensure that a used
car buyer gets a technologically advanced and wide range of cars at fair

Second car at economical price: Several Indian families have a need for more
than one car and used cars offer them a more economically viable option.


Upgrade to a bigger car at a lower budget: This is especially true in case of

people from Tier 2 cities and towns. A used car allows them the opportunity
to upgrade from a two-wheeler to a four-wheeler without stretching their

Other factors responsible for the increasing popularity of used cars is the multitude
quality choices available coupled with an increase in income. All this has created a
situation where people want to upgrade their vehicles more frequently. The
paradigm shift from buying new cars to used cars can be attributed to the
increasing organisation of the pre-owned car players. Apart from these obvious
reasons, there are other benefits that make buying a pre-owned car a popular
practice, such as lower rate of depreciation, easy finance options, and hassle-free
documentation along with clean history.
Current state of used car market in India
According to estimates in the US, for every new car sold, around three used cars are
sold.In Europe, this ratio is 1:2, while currently in India it is 1:1.1 and expected to
become 1:1.3 by 2015. In Europe and other mature markets, the number of
intended new car buyers is increasing, while the number of intended used car
buyers is declining. In India, its a reverse trend that can be attributed to the rising
cost of fuel and increasing disposable income. Though the general economic
slowdown has hit new car sales numbers, the used cars market has seen an
uptrend, clearly indicating that used cars will continue to move forward.
There are several reasons for the evolution and subsequent shift and growth of the
car market in India. Prime among them are:

Improved quality: Used cars available nowadays have an improved and,

hence, longer life due to technological advancements.

Better maintenance: Due to improved quality and performance of

mechanical parts, todays cars are easier and better to maintain. Even a used

car with 40,000-50,000km on the odometer will be much easier to maintain

than a car with similar mileage 8-9 years ago

Less usage: Several urban families have more than one car. And the second
or third car is relatively less driven and well kept. These are great used cars
to be bought and offer excellent value for money to car buyers.

Internet access: With easy availability to high speed internet, more and
more people are able to buy or sell cars on the web. Search costs have also
come down, thereby reducing the dependency on word-of-mouth advertising.

Reducing dependency on used car dealers: People did not prefer to

sell/buy used cars through self-appointed used car dealers because they
could not be sure of the quality as well as the history of the cars sold.
Organised players like Carnation buy only 2 of the 10 cars evaluated. This

ensures high quality of the used cars sold.

Expansion of organised used car players: With the organised players
stepping in, the used cars market has benefited from fair deals, warranties,
better retail network, credibility, transparency, easy availability of finances.
Carnation provides an assurance that all cars sold through its showrooms are
bought by the right people. Hence, both the seller and buyer are assured of
their investment. These have all made buying a used car easy. Organised
used car showrooms also allow prospective customers to pick and choose
cars from various brands and segments.

Even though today less than 20 percent of the used car market is organised, the
lack of
organised players has not proven to be an obstacle. That said, there is a huge scope
growth as most of the market remains untapped.
CRISILs graphs alongside reveal the growth in used car sales volumes and clearly
indicate that the growth prospect for used cars is more as compared with that of
new cars by 2017. Also, since the ratio of new versus used cars in India is still 1:1.1,
the old car market will grow much faster than the new and within that segment the

organised sector will grow the fastest to bring the ratio closer to the 1:3. Thats the
norm in developed markets.

As per the CRISIL report, till 2006-2007, the used car market was dominated by
unorganised players, and C2C with more than 96 percent of the market share. The
number of organised players was just 4 percent in 2006-2007, increasing to 16
percent in 2011- 2012. In the near future, the role of these organised players will
increase substantially.
The future of the used car market
The used car market in India is expected to grow by a CAGR of 20 percent in the
next five years, with the organised sector playing a big role in this growth story. At
present, there are about 750 organised used car outlets in India. In order to keep up
with the projected growth, there is a demand for 3,500-4,000 outlets. Yet another
important fact to consider is the likely implementation of GST. There will be uniform
tax laws across all states making selling and registration of used cars a simpler and
economical process.

2. The Anatomy and Physiology of the Used Car Business

By, Car Internet Research Program II and Capgemini
Car Internet Research Program II and Capgemini.

Buying a new car is the end point of a process that, on average, takes six months2
and involves much research and complex decision-making. In the past, the power
struggle between customers and dealers generally played out in favor of the
later.The development of the Internet has changed the power struggle between
dealers and consumers. Buyers can now potentially gain the upper hand. Customers
are increasingly knowledgeable about cars, their quality, residual value, prices
applied, finance charges, availability, and, more and more frequently, the exact
profit margin that the dealer makes in closing a deal. Dealerships have had to
adapt. The most shrewd and dynamic have managed to turn customer intelligence
to their advantage, by focusing on what consumers really want, namely
transparency and respect. (For more on this, see Inside the Customer/Dealer
Relationship, published by CIRP and Capgemini, 2006.) Has the used car market
changed in the same way as the new car market? Although in some countries, used
car sales represent two or three times the volume of new car sales, there are very
few studies that fully explore the used car business.
The four main countries were chosen for this study for the following reasons:The
United States and Canada are part of an integrated economic system, with the
majority of the population speaking the same language and affected by similar
trends, constraints and influences. The same brands are found in both countries,
with competition around
the same models. Distribution is also carried out in both countries by the same
system of exclusive dealerships. France and Germany both work within the same
European regulatory framework in terms of car distribution. The two countries have
strong national traditions in the automotive industry and develop brands that have
worldwide coverage. Distribution networks are well developed.
Key Findings
Our research identified a number of key findings that characterize the development
of the used car business:
The importance of the used car market is growing significantly.
In both the U.S. and France, for example, the used-to-new vehicle ratio (which
demonstrates the level of used market activity) has increased since 1999 from 2.4
to 2.6, showing a steady growth of used vehicle sales by volume. In addition used

vehicle sales in the U.S. are today more than twice as profitable for dealers as new
vehicle sales
(roughly 2.7% profit margin, compared with 1.2%). Moreover, the used vehicle
financing and insurance segment is often the most profitable operational unit of a
dealership, posting 11.3% profitability in 2005 in the U.S.
The key to growth will be transparency and symmetry of information, as
consumers continue to apply the same approach to research and collection of
information in their search for used vehicles as they do in the new car buying
process. We expect to see greater use of the Internet, more savvy consumers and
more product proliferation. As with new car sales, the relationship between dealer
and customer will need to be based on respect and trust, as well as ease of
purchase. Such a symmetrical relationship will presume that buyers and sellers
possess the same information by which to determine a products quality. For
example, the growth of CarMax has been partly attributed to this approach.
The Internet is increasingly becoming the information source of choice for
used vehicle buyers.
Although consumers still use local newspapers and word-of-mouth when researching
used car purchases, they are turning to the Web in increasing numbers, highlighting
the importance of having a strong Internet strategy for used vehicle programs. A
recent study from J.D. Power points out that more than twice as many late-model
used vehicle buyers in the U.S. find the vehicle they purchase through the Internet
than through both newspaper and magazine classified ads combined.5 Dealers that
have focused more attention on multichannel communication strategies are
beginning to reap benefits, with an increasing number saying their Web activities
have improved sales
and extended their trading range.
The maturity of the used car market varies considerably according to
country, and geographic proximity
does not necessarily result in similar used car markets. It was initially hypo-thesized
that the markets in Canada and the United States would be similar to each other

and different from the French and German markets. However, in many cases these
relationships did not hold and surprising patterns emerged. Each national market
has its own peculiarities, which are a combination of socio-cultural, economic and
historical circumstances. For example, the used-to-new ratio is similar between
France and the U.S, with Canada being surprisingly low.
The most important success strategy in the used car business may be the
development of trust-inducing initiatives such as certified used vehicle
These programs provide the best protection against channel competition and allow
dealers to improve margins significantly while offering an additional source of
revenue for OEMs. In the U.S., where the certified vehicle market is strongest, sales
of manufacturer-certified vehicles have more than tripled between 1997 and 2006,
totaling approximately 1.5 million units in 2005. Other countries are moving in this
direction as well.
Franchised dealers are in a strong position to benefit from growth in the
used vehicle market, supported by OEM involvement in marketing and
certification programs, access to high-quality off-lease vehicles, online inventory
pooling and a more professional image in the mind of the consumer. In the United
States, franchised dealers earned higher gross profits on used vehicle sales than
independents,7 had the highest
closing ratio (with 44% of visitors making a purchase, compared with just 27% for
independent dealers),and benefited from significantly greater customer loyalty,9
with more repeat customers across all vehicle age groups.
Used and new vehicle sales are interrelated and complementary; both are a
function of dealer excellence. Successful dealerships end to have strong sales in
both the new and used vehicle departments. An American study found that new
vehicle sales per dealer correlated positively with used vehicle sales, despite the
counter-cyclical nature of the used car business
Management of new car incentives is critical to ensure profitable used and
new businesses.

With the increase in the quality and image of used vehicles and the popularity of
certified programs, late-model used cars are increasingly becoming a substitute for
new vehicles and vice versa. As a result, incentives in the new vehicle market act to
depress used vehicle prices, lowering residual values and new vehicle sales prices
and reinforcing the incentive cycle. This impact is particularly pronounced for
latemodel used vehicles and for more expensive (and image-conscious) market
Greater professionalism will increasingly characterize the international
used vehicle market over time. Although less professional players can survive in
the used car business when the sales cycle is long and purchase quantities are
small, eventually the cream will rise to the top. This presents a tremendous
opportunity for automotive

Objective of the Study

The research objectives of this study are jotted down below

To understand the growth of used-cars segment in the Indian auto industry in

recent years
o In relation with the new-car segment
o In isolation
To study the organized and unorganized formats of used-car industry in Indian
auto sector
o Players Involved
o Business Models
o Marketing Strategies
o Competitive Scenario (Inter and Intra Format)

o Internal and External Drivers and Challenges

Consumer perception about the used car industry
o Customers take on used-car segment and services
o Comparison of perception for organized and unorganized format

The study is aimed to understand how the basic business model for organized
format of used-car industry is different from the long-time incumbent unorganized
format. This will help us understand two specific pointers How are the organized
format players trying to woo customers from the unorganized players which still
hold the major chunk of the customer transactions? How the unorganized format
players are preparing and adapting to challenge these new-found competitors?

The research is also expected to reveal difference in market and consumer

requirement perceptions among the organized and unorganized format

The study is also expected to answer questions related to business strategies

and models of different players inter and intra format

The second part of the study is to find out how consumer perceives the

overall used-car segment industry

The study will help to establish how the two formats fare against each other
in consumers perception

Scope of the Project

The project has been taken up to study only the passenger car segment of

the Indian used-car industry

The project will study only the brick and mortar format of retailers though,

e-auction retailers will be cited during the findings and analysis

For organized format, though an exhaustive list of players will be mentioned,

detailed analysis will be conducted only for the top three players
The project is taken up to understand the used-car industry scenario in India,
though the data collection has been done primarily from the Delhi region and

the insights hence generated will be projected instead of being actual ones
The consumer perception survey and data collection will be used to generate
insights about the consumer impression of the used-car industry and hence
the insights generated will be qualitative and descriptive

The study of competitive scenario and business model for organized and
unorganized formats is based on personal interaction with dealers and hence
direct insights generated are employed in data analysis

Limitation of Project

A large number of dealers are very apprehensive about sharing information

for various reasons

The boredom and lack of attention that sets in among the respondents while
answering at the last leads to inconsistent answers a few times

Sampling error: the research include a sample size of 70 customers which is

not enough to determine the actual consumer perception. However, around
15 responses from the Dealer side were good enough to create a common
perception though with every new response there is an isolated case in some
or the other parameters and hence it is impossible to bring in every single
detail with the number of responses.

Since it is not a census survey there is always a chance of error while

extrapolating the results of a sample study over the population especially in
those researches where the qualitative aspects are concerned. So it is always
doubtful to map the qualitative aspects using a quantitative measure.

The study was limited to the geographical region of Delhi.

Questionnaire Design for Data Collection

The Data collection was undertaken with the help of two different questionnaires,
one each for the Dealers and customers. The research was conducted out as
primary research as well as secondary research. The questionnaire for the dealer
had 28 questions. The questions were mainly divided into following blocks

Business Model How does the particular dealer runs his/her business
o Procurement, Finance, Stock Maintenance, Sales, Vehicle-types
Dealer specific competitive strategy
o Strengths, Weaknesses, Competition, Challenges

Respondent perception
o Organized versus Unorganized
Customer Profiling
o Information about the customers

Due to the comprehensive nature of the survey, all of these surveys were conducted
as personal interviews.
The questionnaire for the customer had 15 questions about the customers
perception on the used-car purchase and the affiliated format for buying used cars.
A couple of questions also tries to find out the level of research and preparations a
customer does before visiting dealers for car-purchase.
These questionnaires were personally administered as well as distributed
electronically. The questions started with easier questions on personal information
Journals, research reports, articles and news releases were also reviewed during the
course of the project in order to gain insights.

Research Process
Research process was carried out in multiple levels
Primary Data

Collected from Dealers and Customers Two separate survey questionnaires


Personally Administered - Collected by getting questionnaire filled

by the respondents.. The respondents were contacted at Karol Bagh
and Rohini area of New Delhi. Karol Bagh boasts the biggest auto
market in the NCR region and Rohini has a few shopping areas where a
lot of used-car dealer are based at hence the two areas were chosen
for personally administered surveys (also included informal personal
interviews with a couple of dealers). The data was collected by
interacting with a mixed set of respondents of the two surveys. Mainly
Dealers (Organized and Unorganized formats) and few customers were


part of the data collection exercise. Customers were the ones who were
either with the dealers or scouting for a dealer for purchasing the usedcars form the dealers present there. This gave a highly relevant data
set for the study since the customers were actually going through the
decision-making cycle for the used-car purchase. A total of 21
responses were collected by this method. The target population
represents the Delhi regions. The customers were from different
professional backgrounds. The samples were selected by simple
random sampling procedure

Electronically collected Collected by getting questionnaire filled by

the respondents online. The respondents were asked to fill survey
questionnaire online. The data was collected from audience in various
age brackets coming from different economic and social backgrounds
on the idea of used-car purchase and the corresponding format
available to purchase from. A total of 72 responses were collected by
this method. The responses were restricted majorly for people who
have bought or are prospective buyers of a vehicle in order to keep the
data set as relevant as possible. The target population largely
represents the Delhi regions. The customers were from different
professional backgrounds and age groups.

Non-probability sampling was employed for the primary research methods.

Two major types of non-probability sampling techniques were used to conduct
this research. The rationale for choosing the given two techniques was due to
the different nature of research undertaken.

Convenience Sampling based on convenience to send questionnaire

and receive responses electronically. Due to the very channel, internet,
the sampling size is a bit biased and most fo the respondents are in the
age group of 20 to 35. However, we have tried to reach to a few
respondents beyond this age group too.

Judgmental Sampling has been used to collect response from the

people who we fee are most suited to respond to the survey. Hence,
dealers and customers were tried to be reached in areas which are
known for their motor business. Karol Bagh and Rohini in New

Delhi.Also, more often than not those users were send the
questionnaire which we though were right respondents for the survey,
personally or electronically.
Secondary Research

Collected from secondary resources like

o Research Reports
o Journals
o Articles, Blogs and Reviews
o News content
o Press releases
o Official decks from organizations
o Companies official websites
o Association and Agency websites

Details are mentioned in the References section

The given below theoretical framework was applied while conducting the descriptive

Statement of the problem

Identification of information needed to solve the problem
Selection or development of instruments for gathering the information
Identification of target population and determination of sampling Plan.
Design of procedure for information collection
Collection of information
Analysis of information
Generalizations and/or predictions

Following simple hypothesis are laid down for the second part of the report which is
about finding the consumers perception about the used-car purchase and formats
offering used-car for sale. These will be tested for passing in the later sections.

Hypothesis 1
Tight Budget is the primary reason for people to buy used-cars
Buying a car is a big decision for most of its customers. The qualitative and
quantitative risks associated with a car purchase are aplenty. Through this

hypothesis we try to find out if the decision to buy a used-car which may have social
implication for customers usually come from tight budgets

Hypothesis 2
Customers do extensive research before visiting a dealer for a car purchase
Due to the significance and risks associated with the product the amount of
research that customers take up is expected to be extensive to mitigate risks

Hypothesis 3
People are well aware of the organized format of used-car sale industry
Organized format for used-car has been in India for many years now. Hence, it must
have been able to win some share of mind recall and awareness by now. With this
hypothesis we check if people are aware of organized format being present in India
for used-car sale.

Hypothesis 4
Price offered is the most attractive feature of a seller for customers decision
Each dealer in each format has its own usp and drawback. We aim to check by this
hypothesis if the price offered is the most important feature of a dealer to making
him more attractive than other dealers to the customer. This question tries to
unearth what is the most important trait a dealer must posses in order to attract
more customers and close more number of deals

Hypothesis 5
Used car buyers are usually unhappy with their decision
Buying a used car is always a risk and many times its possible that the purchase
decision can turn out to be a failure if the car does not meet the customers


expectation. Through this hypothesis testing we will check If the customers are
generally unhappy with their decision of buying a used car.

Hypothesis 6
One time used-car owners do not prefer to buy another used car again
A used car comes with its own advantages and disadvanatages. There are
chances that the car purchase may not do well for the very reason that it
was not checked properly before purchase and closing the deal. This means
that in such case the customers who have purchase the used-car once may
not be up for buying a used car again. We test this condition with the help of
responses collected from the customers who own used-cars.

Analysis and Findings

Organized Format

The organized format in used-car industry is a rather new entrant. Before it started
its game, the used-car market in India was left to unorganized players. 60% of the
total volume was dealt with by the acquaintances or people who knew each other.
This is called customer to customer format. The remaining 40 % was managed by
the local brokers and agents who worked on commission and got the deals done
between sellers and buyers.
Maruti was the first player to enter into the used-car market in the year 2001 for
organized format. There are multiple reasons for the market leader in passenger
vehicles category to jump into used-car foray which also attracted the other OEMs
Reasons for OEMs and other players to to enter into the used-car space of
auto industry

Expand the consumer base beyond the existing ones which have bought a
new vehicles


The consumers who have bought the new car are the existing base of
the company, but when the company is also present in the lower
segment of used-car industry, it gives it an opportunity to expand it
user base which will help it when these customers will upgrade to a
newer more expensive vehicle since they would already be connected

to the brand
Fast growing market as compared to the new-car market
o The recent data shows that the number of used-cars sold per annum
has crossed the number of new cars sold. The new-car market is in
slump with almost all major OEMs facing loss in volumes and revenues.
At such a time having a related avenue like used-cars seems to be
golden opportunity for the OEMs to concentrate and build upon. A total
of 2.5 million used-cars were sold in 2012 as against 2.2 million new
cars.The market is valued at 52000 crores Rs and is expected to be be
able to sell 7.7 million units by 2017(Source:

Leverage competencies and expertise
o Being in the new car business gives OEM great understanding of the
consumer perceptions and buying behaviour in terms of cars. Also,
these OEMs are settles with their exising distribution models with the
franchisee or owned outlets to sell their vehicles. This means that the
existing expertise and competencies can be very easiy employed to

achieve success in the used-car domain of the auto industry.

Hedging against poor market run
o These OEMs usually have a lot of distribution capital invested in the
market and hence when the market is not doing well like in current
state, they can help get number through the secondary channel of
used-car sales. Under severe profit pressure, such a move may bring

much needed volume and revenue

Controlling the residual or resale value of the vehicle
o Getting into the used-car business also ensure that the OEMs can
enhance their vehicles residual value by offering higher prices for their
pre-owned vehicles in promotional or exchange events and sell their
new vehicles in return. These pre-owned vehicles are then sold at
premium price hence improving the resale value over a due course for

the brand. In turn, higher pre-owned vehicle prices usually increases

the sale of new cars since the difference on price point is not

Higher commission for dealers make them take up the cause of OEMs easily
o Since a used-car can gives a profit of 10-20% to dealer as compared to
what is earned on a new-car sale, which is between 2-5%, it is easier to
build partnership with dealer on this format. This also maximizes the

utilization by a dealer of its distribution network

Allowing multiple price-points for car manufacturers
o An entry in used-car segment means that the OEMs will have an entry
to offer to consumers at lower price-point and hence it can be looked
upon as an ultra low category for some othe car manufacturers who do
not sell vehicles in the range of say 2-4 lacs since the vehicles they will
offer may be prices a tad higher than that. For example, the lowest
priced offering of Hyndai is Eon at 3 lacs and hence it cannot cater to a
segment looking for a vehicle in 1.5 to 2.5 lacs range. Hence, a preowned car coming from a Hyundai owned or franchisee showroom will
allow customers to have entry point to Hyundai brand at a much lower

Used-car Industry players in Organized format

Due to the reasons mentioned above, a lot of OEMs and non-OEMs have forayed
into the used-car segment of the auto industry. Following is the list of some players
in the used car segment


and Mortar
Maruti True Value - OEM
Mahindra First Choice - OEM
Advantage Hyundai- OEM
Tata Motors Assured- OEM
Auto Terrace (Honda) - OEM
Toyota U Trust- OEM
Das Welt Auto (Volkswagen) - OEM
BMW Premium Selection- OEM
Audi Approved Plus- OEM
Proven Exclusivity (Mercedes Benz) - OEM
Car Nation- Non-OEM


OEMs in used-car Industry

Maruti True Value

Maruti ventured into the second hand car market in 2001. It was a move keeping in
mind the future growth prospects. Maruti wanted to further increase its consumer
base. Not by just targeting the new customers but by also capturing the existing
ones from its competitors. It was a strategic move on Marutis part to enter the
second hand car market. The rationale behind this move was that it can attract
more customers by increasing the resale price of its car. And thus Maruti True Value
was born.
Maruti True value has within a decade changed the dynamics of the business and
has forced players like TATA motors and Hyundai to start their own second hand car
businesses. Maruti has been able to establish itself as the dominant player mainly
due to its emphasis on customer satisfaction. This case study looks in the strategies
and processes that have lead to Marutis success
As quoted by Hindu in 2001 when Maruti started its venture into the used-car
industry The pre-owned cars business is being introduced under the sub-brand
name `Maruti True Value' and is aimed at catering to customers who are both firsttime car buyers and those who are looking to upgrade themselves to a passenger
car in a higher segment. MUL is also hoping to retain its customers by offering a
range of cars, resale and financing options all under one roof.
Maruti True Value features

India's largest certified used car dealer network


358 outlets in 210 cities and growing

All car related services under one roof

As a mark of confidence, and to provide reassurance to customers, every vehicle

bought under Maruti True Value is inspected and certified by Maruti Engineers and
the Car carries a one-year warranty and three free services. Convenient finance
options are also offered to buyers of Maruti True Value cars.
Maruti True value follows a franchisee model. It started its service from October
19th,2001 in Banaglore.
Maruti True Value Business Operation Model
MV accepts cars which are not more than four years old (in certain circumstances
older than that) or the ones which have not run for more than 60000 kms .Cars with
more than two ownerships are not accepted by MTV.
Once the car satisfies the above criteria, a team of experienced engineers from
Maruti who are available at Maruti True value showrooms will conduct a standard
120-point check of the vehicle brought to the showroom.
The documents of the seller are also checked for any irregularities. MUL has trained
it s staff at the select dealer outlets to handle its pre-owned cars business.
The engineers at the True Value counter are expected to adopt a transparent and
fair evaluation process to ensure that the seller gets the right price. The outlet will
also offer finance options to the customers, to enable the second-hand car seller to
purchase a new car of his choice.
Consequently, the seller will have the option to be paid in cash, or get another True
Value car in exchange or even a new Maruti car in exchange.
After this, the purchased used car is readied for refurbishment. Using Maruti
Genuine Parts, technicians at the True Value outlet will refurbish the car, which will
then be offered for sale.


For the buyer of a second hand car, MUL is going a step further in offering a oneyear warranty and three free services along with the refurbished car. Again, finance
options are being offered for the True Value car, which will be certified by the
compan y after allowing the potential buyer an opportunity to personally evaluate
the car.
Corroborated by the personally administered survey by Maruti True Value
executives at Rohtak.
Key advantages to seller and buyer

Stringent Quality checks at multiple test points

o 120 points check by experts
Transparent and fair price evaluation technique
o Standard technique to price a particular car with a fixed cap, lower and

upper on the car and model (make)

o Each car comes with a one year warranty and a customer is also

eligible for 3 free services at Maruti service centres

Financing Options
o In order to help its customer with financing the Maruti True value
encourages its dealers to have relationship with banks and lending
institutes so that financing options can be made available to its
customer. The process is also simplified making the average time for

laon sanction two days as compared to four days in other showrooms.

Post sales follow up (PSF)
o This is an innovative feedback and follow-up approach adopted by
Maruti True value. Once the vehicle is delivered to the customer, the
PSF happens at multiple. It first happens after 72 hours of delivery to
find out the feedback of the dprocess and delivery that the customer
has undergone. Then the feedback is requested for the vehicle after 21
days of the delivery. The last customer call happens after 60 days of

the vehicle delivery.

Franchisee follow-up The sales executive associated with a particular
account handles a group of customers and follows up with them and
guides them in case there are any queries.

Maruti True Value Dealer information


A second hand car at maruti true value will cost 10,000 15,000 more

when compared to other players in the unorganized sector.

250-300 new cars are sold by Rana motors, the Maruti True Value

Dealer at Jhandewalan are in Delhi, as compared to 40-50 old cars

Maruti Udyog Limited take 15% of the franchise profit.
There are a lot of repeat customers, who sell their old car to true value

and buy another car from them

Rana motors have consistently

franchises especially in customer satisfaction.

They have received multiple awards for







customer experience.

Survey Findings
(i.) Business Model

(ii.) Competitive strategy (Dealer specific)

(iii.) Organized versus Unorganized


(iv.) Customer Profiling

Mahindra First Choice Wheels Ltd

Mahindra First Choice Services, a wholly owned subsidiary of Mahindra & Mahindra
Ltd., is a chain of multi brand car workshops across major cities in India like
Bangalore, Nasik, Hyderabad, Mumbai, Pune, Surat, Vapi and Chennai. It is Indias
largest multi-brand certified used car company which sells high quality used cars. It
has 223 outlets in 125 cities in India. Mahindra First Choice Wheels Ltd provides
warranty in the form of CertiFirst & WarrantyFirst. The company sold 34,000 cars
last year and expects to sell around 50000 vehicles in the coming year.
The company was established in 2008 and aims to offer a world class car servicing
experience in India at value for money prices. The company employs well trained
technicians who can cater to the various servicing needs of multi-brand cars


The company has been growing at a rate of 30-40% in the last 5 years and aims to
open upto 500 outlets by 2015. The company also claims to see 1 car every four
minutes and hence is towards making the organized used-car industry even more
professionally run one.
MFCL Business Operation Model
MFCL accepts cars from just Mahindr stable but from other brands as well. This is in
line woth the business strategy of MFCL to be the biggest and most efficient multibrand retailer in the country. MFCL accepts cars which are of decent quality and are
not involved in any legal issued. MFCL is especially cautious about accidental
vehicles and does not accept vehicles which have any history of being involved in
an accident. A though check is performed about the owner and vehicles to detect
Cars with more than two ownerships are accepted only with additional health checkups of the vehicle and owners history.
Once the car satisfies the above criteria, a thoroughly trained engineer is bestowed
with the task of conducting quality check-up of the vehicle. A set number of tests
are conducted on the vehicle and its parts. 118 checks are performed before the
vehicle gets ok from the quality check-up.
Once the quality is approved, the documents of the vehicle and owners possession
are analyzed to look for any issues.
After the vehicle gets node from the above processes, the vehicle is bought or
consigned from the owner and kept at MFCL outlet. But this does not happen before
a refurbishment of the vehicles to make it not just acceptable bur also attractive for
prospective customers.
For the buyer of a second hand car, MFCL helps him by offering him loan options
though various banks. Mahindra First Choice also has retail finance relationships
with major banks and NBFCs in the country. For helping car consumers buy their
dream cars through loans, Mahindra First Choice has tie-ups with leading companies
MFCL advantages

Mahindra First Choice claims to offers several advantages, including quality

assurance, safety and a hassle-free driving experience. To give complete peace of
mind to the used car buyer, the company has recently launched two new Warranty
Mahindra First Choice offers several advantages, including quality assurance, safety
and a hassle-free driving experience. To give complete peace of mind to the used
car buyer, the company has recently launched two new Warranty products named


MFCL Autobid (e-auction platform for Mahindra and Mahindra)

Recently MFCL announced that it has sold one lakh vehicles through its Autobid
auction platform (formerly called eDiig). The platform has conducted nearly 7,500
auctions with over 6,500 buyers across nearly 900 locations, making it the leading
used vehicle b2b platform in India.
MFCL Autobid Advantages

End-to-end analytics to our corporate and dealer customers
Value added services


The MFCL autodig is an attempt by Mahindra to align with its bricks and clicks
hybrid model by the used vehicle industry. Mahindra First Choice Wheels claims that
it is already number one in the e-auction market with 35% of the e-auction space.
They have acquired a group of young techies who are doing e-auction as part of

Survey Findings
(i.) Business Model

(ii.) Competitive strategy (Dealer specific)


(iii.) Organized versus Unorganized

(iv.) Customer Profiling

Advantage Hyundai
Hyundai Motor India Ltd. started its certified used car program under the brand
name Advantage. The mission for this initiative was to give good quality used cars
to Indian Customers. Vehicle are certified by Hyundai Engineer using 147 check

points and comes with Hyundai Warranty upto 1 year/20,000Km (whichever earlier
from the date of delivery) & two free services Through this program customer is
assured of Trust, Transparency, Convenience and Peace of Mind.
Quality checks
Every Hyundai car that is sold under "Advantage certified pre-owned car program"
goes through 147 quality checks.

Qualification Checks

Vehicle Age
Structural Damage

Check Points
Not More Than 10 years old
Not more than 1,00,000 KMS driven
Free from all legal issues
No original welding should be damaged.

Under hood / Engine Compartment Inspection

Passenger compartment Inspection
Under Body Inspection
Exterior/ Body Inspection
Road Test

Hyundai Certification process

147 Quality Checks

o Every car is checked for quality & documents before buying
o Car meeting Hyundai Standards are sold under Hyundai Advantage
o Refurbishment is done at the state of art Hyundai Workshop by
Hyundai Trained Technician as per Hyundai standards
o Refurbished using Hyundai genuine parts only
Inspection & certification
o Inspection is done by Hyundai Advantage Engineer
o Certificate & Owners Manual Signed by Hyundai Advantage Engineer
Sales & Finance
o Certified cars are sold with Hyundai Warranty of up to 1 year & 2 Free

Attractive interest rates & finance option available


Tata Motors Assured

Tata Motors Assured is the pre owned vehicle brand from Tata Motors Limited,
Indias largest automobile company. These are the offered services under this

Buying and selling pre owned cars.

Exchange your existing car with new/ used Tata vehicle.

All services under one roof.

Tata Motors Assured cars are handpicked units carefully refurbished in Tata Motors
dealers modern workshops by expert technicians. Moreover, each certified
category car finally undergoes a stringent certification done by Tata Motors
engineers. The Tata Motors Assured certified car brings ultimate assurance of
reliability and good ownership experience.
TMA also offer free assessment for customers existing cars should they be willing to
sell/ exchange it . The assessment is done scientifically using a special assessment
sheet. The prices are arrived based on the car condition and price matrix designed
by TMA.
Eligibility requirement for Tata Motors Assured Certification:

Only Tata vehicles are certified

Shouldnt be more than 7 years old

Maximum mileage 1,20,000 Kms

Shouldnt have been owned by more than two people

Shouldnt have met an accident, resulting in structural damage

Shouldnt have been used in Taxi/Commercial applications


Thought Honda, Toyota, MBA, Mercedes, Audi and VW are also present in the usecar segment but the presence is very small, though growth is expected to come
with expansion and long-term strategies for used-car businesses.

Non- OEMs in used-car Industry

Carnation Auto is an initiative by Mr. Jagdish Khattar, with a vision of developing
Indias largest independent multi-brand automobile sales and service network.
Carnation provides complete car care solutions for almost all brands, starting from
standard servicing, mechanical repairs, body repairs, accessories, insurance, used
car sales/purchase, car exchange, and also doorstep service through a chain of
workshop on wheels.
In an effort to provide total auto care to its customers under one roof, Carnation has
tied-up with leading names in the automobile industry. Tie up with 3M & Gard X are
for value added services, Castrol for lubricants, Bridgestone for tyres and Asian PPG
& Akzo Nobel for paints. By adopting world-class equipment and IT systems we have
been able to implement thorough transparency in the system while enhancing the
quality of service in all our processes. Carnation has implemented SAP Dealer
Business Management suite in India.
Carnation Auto already has 24 Auto Solution Hubs operational across India, one









Sahibabad/Ghaziabad and Kochi; two each in Pune, Chennai and Noida, three in
Mumbai and four in Hyderabad. Carnation already has over 2000 employees.
CarNation advantages to sellers

Right price calculation in the most objective manner

No hidden costs or commissions charged by carnation
Full payment through cheque or draft within 48 hours
Attractive exchange offers
Assurance of choosing the right owner for the car

Carnations systematic vehicle appraisal process and scientific pricing ensures that
the customer gets the right price all the time and all concerns related to
documentation are taken care of.
Carnations selling process
Carnation has trained evaluators to check various factors that affect the price of the
car like age, mileage, number of ownerships, condition of various systems of the car
like engine, transmission, interior, exterior, etc.
After checking the above factors, they verify documents like RC, Insurance, service
history, etc and offer the right price to the seller.
Once a seller goes to the carnation, a trained executive completes the following
documentation from the seller documentation kit:

Transaction related documents: Sale Letter where the amount paid for the car
is mentioned

Finance & Insurance related documents: NOC / Form 35 from financier,

Insurance Transfer document.

Transfer related documents: Various documents are involved like Form-28,

Form-29, Form-30, etc. based on the nature of the transaction.

Once the documentation is complete, the payment towards the purchase of the car
is processed by carnation and the full payment is made to the seller by Cheque or
Demand Draft within 48 hours.
Pre-owned cars certification
Every pre-owned car that comes to Carnation is segregated into Certified Cars or
Value Cars based on the make, age, mileage, number of owners, fuel type,
condition, etc.
Only certain make/models that are up to 7 years of age, not exceeding 2 ownerships
and 80,000 Kilometers, and good condition vehicles (Non Accidental, Non Rusted,
Non Flooded with no major defects) are certified by carnation. Further, the cars are
reconditioned at multi-brand workshops using genuine parts. Then the designated

service engineers inspect the cars and certify them, only then these cars are sold to
the customers wth the Carnation Warranty.
Carnation offers 2 free services and up to 1 year Engine and Gear Box warranty on
all its certified pre-owned cars. Each Carnation Certified car also comes with a
system generated Certificate and Free Service coupons that can be availed across
all Carnation HUBs in India.
It also offers it s customers a 6-month Carnation Roadside Assistance along with
every Certified Car, which is a 247 break down rescue program which provides
prompt service to its customers.
160-point check-up
At Carnation, every car is put through a stringent 160-point check for various
systems including engine, transmission, brakes, clutch, suspension, steering,
electrical, heating/ AC system, body, documentation, etc. to ensure that the
reliability & integrity of the vehicle and the documentation are not compromised.


Carnation Advantages for Buyers

The assurance that the car is non-accidental & non-flooded

Clean documentation

Thorough reconditioning at state-of-the-art workshops using genuine parts

Warranty up to 1 year and 2 free services

24X7 On Road Assistance

Convenient finance facility through HDFC Car loans, Kotak Mahindra &
Shriram City Finance

Financing options for customer

Carnation have tied-up with 2 leading banks HDFC & Kotak Bank as well as Reliance
Capital & Shriram City Finance to provide easy and convenient finance facility at
attractive interest rates to all car buyers.
Source: CarNation auto-solution website
CarNation Pre-owned cars official website article on Jagdish Khattar and Carnation
Forbes India Article on carnation's expansion and challenges

Survey Findings
(i.) Business Model


(ii.) Competitive strategy (Dealer specific)

(iii.) Organized versus Unorganized


(iv.) Customer Profiling

Unorganized Format
Close to three-fourth of the used-car industry market is dominated by unorganized
sector. According to a SIAM report, annual used- car sales could reach 5 million
vehicles by 2015 and more than 9 million vehicles by 2020. Fast-growing pre-owned
car. Among the unorganized sector, almost a third of card are sold by
neighbourhood dealers. These are shops which buy and sell vehicles from people.
These dealers usually do not own the vehicles. Most of the vehicles are kept by
owners at these dealers to show to prospective customers. When a buyer
approaches these dealers and chooses a particular vehicle, the dealer on finalizing
the deal takes a variable or fixed commission from the seller and/or buyer.
The commissions varies from Rs 3,000 upto Rs 10,000 for a car depending upon
the car model, make, price etc.


In our survey with such dealer following insights were generated on the business
model, perception of used-car industry, strength and weaknesses of organized and
unorganized sector in used-car domain and the visiting customers profile.
The survey questionnaire can be checked in annexure. The responses were taken
during personal interviews with dealers of organized and unorganized format over a
period of 2 weeks.
Findings are as below

The dealers in unorganized sector can be broadly segregated in two groups.

o The well-funded bigger players who acts almost like the organized
players but have some differences in respect to pricing, warranties,

certificates and customer relationship.

The other group is comprised of typical small brokers who have exactly
similar model with each other works as a cohort which has more
similarities than differences in terms of business model, market
perception and strategic focus

Higher-end dealers

Business model

For procuring vehicles, these dealers along with the ways established
generally (approaching and being approached by customers), also get

smaller brokers with car buyers and sellers along

The cars are usually procured on consignment as well as show-case
basis which is similar to smaller brokers. Rarely does these brokers buy

vehicles to sell
These dealers usually have a one or two another garages or

warehouses where they keep the vehicles in stock

Almost 5% of expenses are bored by the buyer in order to ensure that
these dealers keep their vehicles in their stock. This investment leads
to a higher cost of the vehicles and hence buyers agree to this

expense. Very rarely, they pay for the expenses

These buyers usually sell around 15-20 vehicles every month with the

average vehicle cost being between 2 - 4 lacs

They have options of cash, exchanges and finance from banks for the
buyers for financing


Mostly the vehicles sold are those which have an average running of
less than 40000 kms and are 2-6 years old

Competitive strategy

High-end dealers keep variety and availability of stock as the top

success factor while they duly value being reliable as an important

factor as well
These dealers expects themselves to have an edge over organized
dealers due to the personal relationship they are able to build with
their clients which they think are very professional in case of organized

format dealers
Recognizing that the biggest problem with unorganized dealers is trust
and reliability, these dealers feel that since they invest time and
money on service and quality of vehicles as well as on customer
relationship they sit pretty against unorganized dealers on the
parameters of better stock of vehicles and higher customer

Unorganized sector is perceived as the biggest competitor due to the
volume they handle and their higher approachability as compared
organized format retailers

Organized versus Unorganized

Organized sector is not considered as a great challenge and its

standing is said to be just fair in the used-car market at the present

Offering vehicles at a higher price (10000-25000 Rs more) than the
ones being offered in unorganized market make them stand weak as
many customers are not ready to pay that premium for the services

and features being offered by organized dealers

Brand name and Available funds however are strong points for the
organized players which help them offer wide service packages which

is difficult to replicate for unorganized players

Price (in favour of unorganized) and Trust/Reliability(in favour of
Organized) are major difference points between the two formats

Visiting-customer profiling


Biggest chunk of customers come from the age group 25-35 pointing
toward a decreasing buyer age for cars. It also point towards the fact
that at this age people want to own a four-wheeler, if not a new one, at

least a pre-owned
Trust, price and model are top factors which are important for


customers when then walk into the showroom or outlet

Customer are well-equipped with information about cars and models
Only 20% of the vehicles being sold are sold to females

Other dealers

Business model

For procuring vehicles, these dealers usually approach customers who

they are aware of having vehicles that are to be sold. These dealers
usually get into touch with the prospective buyers though personal or
professional contacts. Buyers too approach these dealers which is

again largely though acquaintances and personal relationships

The cars are usually procured on show-case basis which means that
the seller keeps the vehicle at his own risk at these dealers and if the
vehicle is finalized by a buyer, he ris informed. The final deal can
happen with or without seller being present. In many cases, the
dealers inform sellers about a prospective buyer and ask them to come
to the shop with the vehicle. Vehicles are never purchased or put in to

consignment basis
These dealers usually keep vehicles around their shops. A few cases
were found where a couple of dealers have rented a place commonly
to stock their vehicles. They dont usually invest in place to stock

Less than 2% is spent in pre-purchase expense to maintain profitability

for the seller and hence a higher premium

These buyers usually sell less than 10 vehicles a month with the


average vehicle cost being between 1 - 3 lacs

They usually have options of cash and exchange of vehicles only
Mostly the vehicles sold are those which have an average running
between 40000 70000 kms and are 2-6 years old

Competitive strategy


These dealers keep stock and prices as the major key success factors
These dealers expects themselves to have an edge over organized
dealers primarily due to the lower prices they offer for the vehicle and

personal relationship they maintain

Interestingly, each of the dealer feel that he has a key advantage over

his other peers on the basis of better customer relationship and Trust
Unorganized sector is perceived as the biggest competitor while
getting hold of the right vehicle and being able to win trust of
customers are major challenges for unorganized sector

Organized versus Unorganized

Organized sector is not considered as a great challenge and its

standing is said to be just fair in the used-car market at the present

Offering vehicles at a higher price (10000-25000 Rs more) than the
ones being offered in unorganized market make them stand weak as
many customers are not ready to pay that premium for the services

and features being offered by organized dealers

Brand name and Available funds however are strong points for the
organized players which help them offer wide service packages which

is difficult to replicate for unorganized players

Price (in favour of unorganized) and Trust/Reliability(in favour of
Organized) are major difference points between the two formats


Visiting-customer profiling

Biggest chunk of customers come from the age group 25-35

Trust, price and model are top factors which are important for
customers when then walk into the showroom or outlet, though the

ranking may differ from dealer to dealer

Customer are just fairly-equipped with information about cars and

Only 10% of the vehicles being sold are sold to females


Consumer Perception of used-car purchase in India

Hypothesis Testing
Hypothesis 1
H0 : Budget is the primary reason for people to buy used-cars
H1 : Budget is not the primary reason for people to buy used-cars

As seen from this multi-optioned frequency table generated for the various reasons
as given by the respondents for buying a used-car, Budget appears to be primary
reason with 46 respondents answering it as the primary reason out of the total
respondents which were 79 in number. Also, each response was broken up into a
single entity to reach to the total response list of 219. 21percent of these responses


suggested budget to the primary reason of buying a used-car. Hence, the null
hypothesis is accepted.
Hypothesis 2
H0 : Customers do extensive research before visiting a dealer for a car purchase
H1 : Customers dont do extensive research before visiting a dealer for a car

t(77) = 0.583, p=0.562 ; dof = 77

Taking the value of confidence interval as 95% and value of alpha being 0.05, the p
value or the significance of difference is seen to be 0.562 which is more than the
prescribed limits of 0.05 and hence the hypothesis is accepted. This means that
most of the customers do extensive research before they visit a car dealer as part of
the alternative evaluation of their decision making model.
Please note that the responses are for the combination of new as well as used-car
purchase event and hence no distinction is drawn in this question in particular. This
questions was especially important due to the fact that the dealers perspective on
customers preparedness for buying a vehicle elicited a response that deemed the
preparation to be just fair, while here the customer believes that he is aptly
prepared with the help of extensive research undertaken by him.


Hypothesis 3
H0 : People are well aware of the organized format of used-car sales
H1 : People are unaware of the organized format of used-car sales

Since the answers to the question were dichotomous, a frequency test was
conducted to see the if the number of responses are clearly shifted towards one
point. The cumulative percentage for variable one for aware was scored at 72.2
percent and hence clearly shows that the sample was largely aware of the use-car
organized format segment. Hence, the null hypothesis remains accepted
Hypothesis 4
H0 : Price is the primary feature for attracting customer to a dealer
H1 : Price is the primary feature for attracting customer to a dealer


As we can see from the descriptive and frequency charts above, the total entries
(multiple entries were allowed for users to be made during survey) have a mix of
various factors that can be made the usp and hence the prime attractive feature for
the dealer.
However, unlike anticipated, price is not the most important feature which a
customer look up to for valuing a particular dealer. As seen from the chart,
Credibility of the dealer is the most important factor that the respondents have
marked as the primary feature to attract them to the dealer. The highest percent
has been taken up by the credibility of dealer while interestingly services being
offered is the second important factor.
These test results points towards a shift in user decision making process. Since the
majority of respondents were those who have purchase or are planning to purchase


a used-car, demand for better services and packages by the dealer comes as a
pleasant surprise and a boost to business models of players in organized sectors
since their usp is professional services to the customer, which seems to have
become hygiene factors rather than motivational factors for users even in the usedcar industry.
Hypothesis 5
H0 : Used-car buyers are unhappy with their purchase owing to higher postpurchase dissonance
H1 : Used-car buyers are happy with lower post-purchase dissonance

t(79) = 5.494, p=0.000 ; dof = 78

With the value of confidence interval being 95% and value of alpha being 0.05, the
p value or the significance of difference is seen to be 0.000 and hence is less than
the p value. The null hypothesis in this scenario hence stands rejected.
Qualitatively, this means that the used-car customers are not unhappy with their
purchase. The responses suggest that the cognitive dissonance is not high in the
used-car buyers. This may due to the subdued residual risk due to lower investment
in case of a used-car as compared to an investment which can 2-3 times if the
customer buys a new car. Used-car buyers are happy with lower post-purchase

Hypothesis 6


H0 : Used-car owners do not prefer to buy another used car again in future
H1 : Used-car owners do prefer to buy another used car again in future

t(34) = 5.494, p=0.000 ; dof = 34

The responses collected for this question were restricted to the respondents who
have purchased a sed-car. This is done to have relevant set of users since with this
question, the idea was to find out what does the owners of used-car think of the
idea of purchasing another used-car as their next purchase. Interestingly, as the
above chart shows, the owners were quite satisfied with their used-car purchase
and were happy to opt for another old-car purchase in future.
Quantitatively, the value of confidence interval being 95% and value of alpha being
0.05, the p value or the significance of difference is seen to be 0.000 and hence is
less than the p value. The null hypothesis in this scenario hence stands rejected.
Qualitatively, this means that unlike anticipated, used car owners are more than
open to purchase another used-car. This may be for multiple reasons like lower postpurchase dissonance, lower risks involved in the purchase, levy to change vehicles
quickly without losing a lot of money in the bargain since the resale value of usedcars are better than the new-cars and a new car in exchange may cost just a little
over than the proceeds from the sale of the old-car. This gives a wonderful
opportunity to the dealers to reach out to their one-time customers with deals they
think will be well-suited for certain customers and hence try t get hold of a customer
who might otherwise move to another avenue looking for a deal.


Qualitative Analysis

Used-cars are not just bought by people who cannot afford new cars. More than a
quarter of customers who own a used-car have an annual income of more than
9,60,000 pa.

Used-car buyers Income Levels

Income 480000 - 960000 pa

Income 960000 and more pa

Income 240000 - 480000 pa

Less than 240000 pa




Pre-owned car owners usually do not regret buying a used-car. The below chart
indicate that 90% of its buyers are happy with the purchase

Ownership Experience of used-cars







Interesting things comes out when we analyze how much kms a vehicle can do
before it loses its interest among used-car buyers. The below chart shows that most
of the respondents believe that a vehicle which has run upto 60000 kms is still
attractive to buy.
However, when we go deeper and find out, how many of these actually own a used
car and what is the perceptions of customer who owns or plans to own a used car, a
different picture comes out. This means that though people may say that a used-car
is acceptable till it has run for as much as 60000 kms, when it comes for them to
buy (serious used car buyers and prospects), they prefer vehicles which are lesser
run. This also means that the number is inflated due to respondents who either does
not own a car or owns a new car.

Preferred vehicle run for pre-used car purchase


Less than 20000 kms



Between 20000-60000 kms

Between 60000-100000 kms

Number of dealers which a customer visits depends upon the new or used-car he
wants to purchase.
New-car dealers or showrooms are usually single brand showroom hence a
customer knows which manufacturers model he will own he buys car from a single
brand new-car showroom. Also before buying a new car a customer has filtered out
many manufacturers already and hence is partially aware of which manufacturers
car he is going to buy. Hence, in this case the number of showrooms visited is less
than that of pre-owned car outlets.

Pre-owned car outlets on the other hand, offers multiple brands under one roof.
Also, the biggest problem in pre-owned car dealers is the trust deficit and hence a
customer wants to assure himself of a good deal before closing it, hence he prefers
to visit many more outlets than what a new-car buyer visits.

No. of dealers visited before purchase


7-10 dealers


4-6 dealers


< 3 dealers





More than 72 percent of the respondents were aware of the organized format for
used-car sales. The below chart shows brand recall for the players in the used-car
segment. Maruti true value is far ahead of its competitors.

Brand recall of organized-format players


Following are the financing options which customers prefers and wants them to be
available with their dealers to help them in closing a deal.


Preferable Financing Options

Dealer loan Required
Bank Loan Required
Exchange required








Used-car industry has flourished in India in past few years in an extraordinary way.
This sister-industry of the new-car sector has came a long way from selling a few
thousand cars every year to the current situation when it is selling cars almost one
and a half times more than that of the new car industry. The core reasons for this
growth have been multi-faceted. Right economic environment has enabled a large
chunk to earn, consumer and hence spend more. The rise of the middle-class and
hence the overall income has been greatly responsible for this consumerism and the
growth that has come by.
Specific to the used-car segment, the growht


Scope of Future Study

The project can be extended to study further the significance, challenges and

growth drivers for the used-car industry.

An extended study in detail can be conducted for all the players in the
o Brick and Mortar
o Online

A study can also be taken up to closely segregated business models of

individual OEMs, Non-OEMs and Unorganized-format players

A strategy can be built up based upon inputs from the above pointers for
making an entry into the used car format in organized segment. This can be

for OEMs or Non-OEMs

Customer perception can be studied in detail to match it up with the

challenges and opportunities that lies ahead for the used-car industry
The study can be extended to have dealers and customers respond to survey
across geographies in order to have a consolidated view of the used-car

industry across country

Individual players impression and perception among customers can be
recorded to come up with the difference in demand and supply that exist in

the market and recommendations can be made to close that

The study can also be extended to research in detail on how the perceptions
differe majorly between the used-car buyers and new-car buyers. This will
give an idea on how the exisiting strategies of OEMs who have experience in
selling new-vehicles must be altered to meet the customers expectations

Research papers
Anatomy and Physiology of the used Car Business, Capgemini Consulting and


Pre-owned car market in India A study of marketing strategies, International

Journal of Science and Management, Krati Sharma
The Pre-owned Car Market : Purchase Behaviour and Satisfaction of Customers,
India Management studies Journal, Gagandeep Banga, Babita Kumar, Pratibha Goyal
and Jasmeet Kaur
A study on consumer buying behavior for used cars, Institute of Science, Poonas
Institute of Business, Dr. Shriram Shimpi
JP Morgan India Auto Industry, Jan 2013
JP Morgan India Automobile Sales Tracker, Jan 2013
Used car market on a roll, set to grow 11%, Globalaxis,, 2012
Public Documents
Car Trade deck on used-car business in Inida, Vinay Sanghi, CEP Car Trade
Indian Auto Industry, Suni Kakkar, General Manager (SCM), Maruti Suzuki
Used-car Markeitng in India, Research on India, 2010
Understanding Certified Pre-Owned Cars, Keith Girffin
Evolution of Indian Autocar Industry, Autocar Professional

CarNation auto-solution website
CarNation Pre-owned cars official website
News Releases as mentioned during the report