INDIA PRE-OWNED CAR MARKET REPORT

1st Edition (2016)

BROODWAY

ONE WAY
India Pre-Owned Car Market Report
1st Edition (2016)
 FOREWORD This Year's Report
The Indian pre-owned vehicle industry, though nascent in This report is the result of a collective effort by the Summary Insights 1-6 Pre-owned Car Value Chain: Journey 24
development, is rapidly achieving scale. With India expected to IndianBlueBook (www.indianbluebook.com) team and its Characterized By Transactional Friction
be amongst the Top 5 automotive markets in the world, the partners in India and globally. It has leveraged India’s largest
India, China, U.S. Compared People Online 25
pre-owned vehicle ecosystem is going to be an important footprint “on the ground” via the Mahindra First Choice
segment of the overall economy, and an important factor in Wheels Ltd. franchise network and significant presence “in the Motorization Levels And Car Parc 7 Automotive Traffic Online 26
how the automotive industry and also the overall economy cloud” with a suite of industry leading online properties New And Pre-owned Car Market Sizes 8
evolves. including but not limited to IndianBlueBook and eDiig. We Pre-Owned Car And Consumer Profile
Stage Of Development 9
believe the analysis is seminal in nature and attempts to
Defining Dealer Segments 10 Profile Of A Typical Pre-owned Car 27
A pre-owned vehicle - in most parts of the world - satisfies one “connect the dots” better than any report to date both in scope
of the most important family aspirations - ownership of the and detail. With this publication being the first of ongoing Scale Of Dealer Networks 11 A Look At Fuel Composition & Car Segments 28
first car. We see India evolving similarly, but great strides have future editions, there is a special section that looks at the Dealer Segment Penetration In Pre-owned Cars 12 Consumer Insights 29
to be made to enable a good buyer & seller experience. Indian market in the context of two other (important) global IBB Index: Relative Pre-owned Vehicle Pricing 30
Productivity Of Dealer Networks 13
Buyer-seller trust deficit levels are still very high, with relatively markets – the U.S. and China.
Dealer Economics 14-15 A Word About Wholesale Markets 31
low levels of consumer protection.
Over the last 24 months, the pre-owned vehicle industry has A Few Other Market Considerations 16 Sources 32
The industry IS changing as it grows. The industry is getting been the subject of much attention from a variety of industry
more organized and also being enabled with technology. stakeholders – Investors, OEMs, Dealers, Financial Institutions
Pre-Owned Car Market In India
However, little is specifically understood about the industry and Consumers. This report should be useful to all
due to severe paucity of data – either from private or public stakeholders in assessing the Indian pre-owned vehicle Four Major Market Segments 17
sources. Hitherto, it has been extremely difficult to even industry both domestically and in the global context. Dealer Footprint 18
establish industry volumes at any level of detail with a high Dealer Productivity 19
degree of confidence.
Geographic Overview 20-21
Pre-owned Car Finance Penetration 22
Nagi Palle
MD & CEO Pre-owned Car Financing 23
Mahindra First Choice Wheels Ltd.
Summary Insights
 A MULTI-FACETED INDIAN PRE-OWNED CAR INDUSTRY SCALE: Reached cri�cal mass, significant poten�al IndianBlueBook

TOP 5 45%
automotive markets 15%+
per year
sold in metros

India is expected to be amongst
the top 5 automotive markets in
the world by 2020
SCALE STAGE
At 3.3 million units, the Just under half of all pre-owned
pre-owned car market is growing cars sold are in metros
at over 15% a year (organized
segment growing at 25%+ per year)

MARKET OPPORTUNITIES NORTH 30,000

dealers
leads the pre-owned car
& CHALLENGES
market in India
The North zone (36%) represents the largest geography followed by Nearly 30,000 dealers engage
the West (27%), South (26%) and East zones (11%) in pre-owned car sales

277
India’s internet population at 277 million is ahead of the U.S.
(270 million) and behind China (668 million).
India has amongst the highest number of people online and offline million people online
STRUCTURE
1 2
 STRUCTURE: Largely unorganized retail & wholesale STAGE: Pre-owned car market is developed in some ways, nascent in many IndianBlueBook

Pre-owned car channels are highly fragmented, with four primary market segments

Pre-owned car market is

SUPPLY ORGANIZED SEMI-ORGANIZED
The unorganized sector is
HIGHLY India’s motorization rate lies at INDIA
more organized
CONSTRAINED 12% 35% FRAGMENTED 22 CARS/1000 PEOPLE than China
market share market share
Average volume at Average volume at The unorganized sector
U.S. motorization rate is over 800 cars/1000 people and its car parc Unlike the U.S., India is highly
16 per month 9 per month accounts for the bulk of the
is 10X that of India unorganized, but more
dealer population (58%) and
organized than China
19% of the total volume
UNORGANIZED
Unlike mature markets, CONSUMER TO Like the U.S., India’s pre-owned car market is larger than its
19%
1.2X
Unorganized sector
CONSUMER
India’s market is supply market share dominates supporting services new car market. China’s pre-owned car market less evolved
Pre-owned car market in India
constrained, with Average volume at 34%
market share Paper transfer that of new car market compared to that of India at 0.5 times that of the new car
inventory turns at dealers <3 per month Finance/Insurance market
under 30 days
vs. traditionally 60+ days
In India, a dealer’s license is not required to retail used cars.
in the U.S.
Pre-owned car markets are local in nature with significant paperwork

Repossessions account for 80% of wholesale market challenges and bureaucracy associated with car ownership moving
across state lines

SUPPLY CHALLENGED: There are no formal wholesale channels for dealers to procure cars
3 4
 STAGE: Pre-owned car market is developed in some ways, nascent in many PROFILING THE AVERAGE PRE-OWNED CAR & ITS CUSTOMER IndianBlueBook

SCALE AND Length of car ownership at

PRICE POINT 48 MONTHS
are major drivers
E F
Dealer productivity and gross margins make Not far behind the U.S., much further ahead
India a relatively shallow market of China (66 months)
(dealer economics) Average age at the Average ticket Average mileage Average number of
time of sale is 4 years size is `3-4 lakhs is 45,000-50,000 kms prior owners is 1

Metros have a higher share of pre-owned car finance

(58%) relative to non-metros. Organized sector is Pre-owned car finance penetration
most efficient for generating loans.
There are over 6,000 approved NBFCs in local
UNDER 15%
markets that are funding pre-owned vehicles in India

LOWEST AVERAGE The internet is increasingly becoming a major source

For more than half, a pre-owned car
is the first in the family
Consumers are browsers
online, but buyers offline
50% of buyers are in the
25-34 years age segment
INTERNET SPEED of information for consumers. However, internet
IN APAC infrastructure remains poor with significant room for
development
Affordability, followed by value for money–primary reasons why customers consider pre-owned cars

5 6
India, China, U.S. Compared
 MOTORIZATION LEVELS AND CAR PARC NEW AND PRE-OWNED CAR MARKET SIZES IndianBlueBook

Motorization rate (cars per 1000 people) New car market size-2015 (million units)

21.1M China is the largest new car market in the world

17.5M followed by the U.S.
Motorization: global rankings
2.8M
22 113 809 Currently ranked 6th, India is expected to be
U.S.
China amongst the

TOP 5
#4 India India China U.S. automotive markets
# 98
# 160 by 2020
New car market size
India China U.S.

U.S., a very mature pre-owned car market, is

10X
Pre-owned car market size-2015
Vehicle car parc (million units) (million units)
the size of india 38.3M

Indian market is still nascent, 10M

3.3M
with significant headroom
for growth However, the Indian pre-owned car
25 140 250 market is amongst the fastest growing at

15%+ per year

India China U.S.
Pre-owned car market size
India China U.S.

7 8
 STAGE OF DEVELOPMENT DEFINING DEALER SEGMENTS IndianBlueBook

Pre-owned vehicles : new vehicles ratio Unlike the pre-owned car markets in the U.S.
and India, the Chinese pre-owned car market is
2.2 smaller than its new car market

Indian pre-owned car market is more evolved

1.2
than the Chinese market
0.5

Length of ownership
India China U.S. Replacement cycle (in years) Organized dealers Franchise dealers Franchise dealers

New/Pre-owned vehicle sales volumes 4 5.5 3. 5 二手车

(as % car parc)
15% 15% India China U.S.
13%
Semi-organized dealers
11% New car sales/car parc ratios indicate growing Independent dealers
7% 7% motorization in China and India Unorganized dealers

Pre-owned car sales/car parc ratios indicate Nascent Mature

maturity of market with India showing greater
churn vs. China
India China U.S. China India U.S.
Unorganized dealers
New car/car parc Pre-owned car/car parc Dealer maturity scale
9 10
 SCALE OF DEALER NETWORKS DEALER SEGMENT PENETRATION IN PRE-OWNED CARS IndianBlueBook

Number of dealers by segment Share of cars sold across dealer segments

Unlike the U.S., most Indian and Chinese new car U.S. has a very well-organized
dealers don’t engage in pre-owned car retail automotive retail network
29% 27%
116,130 46%

36,000 52% 19% 54%

73%
17,310
19,360 19,360
17,580
10,500
5,000 2,110 10,550
India China U.S.
New car Pre-owned car New car Pre-owned car New car Pre-owned car Organized dealers Franchise dealers Franchise dealers
India* China U.S. Semi-organized dealers Unorganized dealers Independent dealers
Franchise dealers Unorganized dealers
Organized dealers Franchise dealers
Semi-organized dealers Unorganized dealers Independent dealers
Unorganized dealers Volume of pre-owned vehicles
sold per dealer India: 71
China and India highly unorganized markets for pre-owned cars; however, India is more organized than China Organized dealers represent the minority of pre-owned vehicles per year
sold in China and India indicative of still evolving markets China: 75
*Unorganized segment is probably a bit underrepresented given that not all unorganized dealers are perhaps ‘active’ every month. Often, multiple
unorganized brokers are involved in a single transaction U.S.: 533
11 12
 PRODUCTIVITY OF DEALER NETWORKS DEALER ECONOMICS - PART 1 IndianBlueBook

Number of vehicles sold per dealer per month

100 India amongst the “leanest” automotive markets in the world,
75 with 60% of all new cars sold under $12,000
69
47
31
16 20
9
<3 5 Average ticket size for franchise/organized dealers (USD)
New Car Pre-owned car New Car Pre-owned car New Car Pre-owned car
$33,420
India China U.S.
Organized dealers Franchise dealers Franchise dealers $15,000 $19,400
Semi-organized dealers Unorganized dealers Independent dealers $11,500
Unorganized dealers $9,000
$5,500

Organized dealer productivity is

4X
highest in U.S. New car productivity
vs. India is highest in China India China U.S.

3.5X vs. China 2x vs. India New car Pre-owned car

Organized dealer networks are key to improve productivity across all markets The average price of a pre-owned car sold is lower than in other markets

13 14
 DEALER ECONOMICS - PART 2 A FEW OTHER MARKET CONSIDERATIONS IndianBlueBook

Estimated auto finance penetration - new and pre-owned (%)

High ticket prices and a highly organized U.S. market affords a typical dealer
with significantly higher monthly gross margins compared to India and China

38.5% 23.6% 60%

Total gross margin per month - average dealers (USD)
India China U.S.
$249,820

$78,000 Does a dealer need a license to retail pre-owned cars?

$34,380 India China U.S.
$26,630
$2,520 $2,250 No Yes Yes

India China U.S.

Organized dealers / Franchise dealers
Independent / Semi-organized / Unorganized dealers
Additionally, high real estate and
Vehicles cannot move across In order to ease inter city and inter provincial
state lines in India without sales in pre-owned cars, China State Council
significant registration issues introduced new guidance (effective 31st May, 2016)
and expense

9x
Organized dealers in India make 9x capital costs in India pull down Prior ownership is a significant driver of pre-owned vehicle prices in India–often leading to delayed
monthly gross margin vs. unorganized dealers
dealer disposable income re-registration of vehicles upon change in ownership

15 16
Pre-Owned Car Market In India
 FOUR MAJOR MARKET SEGMENTS DEALER FOOTPRINT IndianBlueBook

Pre-owned car market in India Types of dealers across India

Indian market largely unorganized with
consumer to consumer transactions Organized segment is

12%
making up a third of all pre-owned car
transactions
growing at over
25% a year
7%
34%
Share of metros vs non-metros
35%
Dealer count across metros and non-metros
58% 35%
29,920

19%

10750
Organized dealers Semi-organized dealers 55% 45%
Organized dealers Semi-organized dealers
6560
Unorganized dealers C2C 6520
Unorganized dealers
3980
1310
800
Metros comprise 38% of the dealer
Non-metros account for over half the
network. Non-metros make up the balance, Organized Semi-organized Unorganized Total
pre-owned car volume sold and are
growing faster than the metros Non-metros Metros however, highly fragmented in nature Metros Non-metros Total

17 18
 DEALER PRODUCTIVITY GEOGRAPHIC OVERVIEW - PART 1 IndianBlueBook

In India, on an average a dealer sells

6
Average volume per dealer per month across segments - Pan India
cars per month
Share of total volume by zone (%)

Jammu & Kashmir

Himachal
Volume per month by state

North – 35.5%
Pradesh
Punjab
Uttaranchal Arunachal
Haryana Pradesh
Delhi/NCR
Sikkim
Assam
Rajasthan Nagaland
Uttar Pradesh
West– 27.4% East – 10.8% Bihar
Meghalaya
Manipur

and Tripura
Jharkh
16 9 <3 Gujarat Madhya Pradesh
West
Bengal

Organized dealers Semi-organized dealers Unorganized dealers tti

sg
arh Mizoram
ha
Ch Odisha
South – 26.3%
Maharashtra

Average volume per dealer per month across metros and non-metros
Andhra
19 Pradesh <5000
14 Goa
5001-10000
10 North & West zones account for over 60% of all Karnataka

8 10001-15000
<4 <3
pre-owned car volume sold, with the East zone 15001-20000
Pondicherry
20001-25000
Organized Semi-organized Unorganized being significantly smaller than the other zones Tamil Nadu
Kerala 25001-30000
Metros Non-metros 30001-35000
35001-40000
Organized dealer networks are significantly more productive than the unorganized
19 20
 GEOGRAPHIC OVERVIEW - PART 2 Share of organized and semi-/unorganized segments PRE-OWNED CAR FINANCE PENETRATION IndianBlueBook

Share of total volume by zone (%) Share of pre-owned car finance by dealer segment Organized and unorganized
penetration across India
Organized Semi-organized & Unorganized

North – 40% North – 34.5%

40% 40%

46% 54% 18%

6%

West– 29% East – 14% West– 27% East – 10%

Metros Non-metros

Organized dealers Organized dealers

Semi-organized/Unorganized dealers Semi-organized/Unorganized dealers

South – 17% South – 28.5% The organized channel originates approximately half
of pre-owned car loans, enabled by more robust
processes and transparency.
North & West exhibit more organized channels than the South. East, while more organized, is a
Financing is primarily dealer originated. C2C
significantly smaller market and also highly concentrated in a few areas
transactions predominantly happen via cash
Finance penetration is significantly higher within
the organized channel.
The semi-/unorganized channel is highly
fragmented with higher channel costs for
lenders

21 22
 PRE-OWNED CAR FINANCING PRE-OWNED CAR VALUE CHAIN: Journey characterized by transac�onal fric�on IndianBlueBook

Auto financing penetration - India Share of pre-owned car finance

65%
Online Check reviews

$̀
$
15% $
$
(Approximately) $
$ Classifieds Compare cars
$
$
Price check
$̀ $
$
$̀ $
$ $̀ $
$̀
$
$ $
$ $
$ $
$
58% 42%
$
$ $
$ $
$ $
$
$ $
$ $ $
$
Locate inventory online
Pre-owned car New car

Approximately 150,000 new cars and 30,000

pre-owned cars are financed monthly
5X
vs. pre-owned car Metros Non-metros

Offline Seller Inspect Test drive Decision Negotiate Trade-In Purchase Servicing
Pre-owned car interest rates are 4.5%- 6.5% higher than for new cars to buy

In addition to the larger players, there are more than 6,000 approved NBFCs People research in the CLOUD `

that are funding pre-owned vehicles in India but transact on the GROUND
Average LTV is between 75%-80%; the average disbursement is `3 lakhs
Accessories Annual Warranty Paper work Finance Insurance
maintenance
There is significant headroom for pre-owned car financing, with growth expected in the coming years contract
23 24
 PEOPLE ONLINE AUTOMOTIVE TRAFFIC ONLINE IndianBlueBook

Internet Penetration Internet connection speeds (mbps) - Q4 2015 Total visitors per month Total visitors per car sold per month
(major auto portals - as reported) - in millions

61.5
22% 49% 85% 15
7.9 8 22.4
26.7 4.8
21.2
14.2 3.1
2.8 4.1

India China U.S. India China U.S.

India China U.S. India China U.S.
Average speed Average peak speed
People online
277 Million 668 Million 270 Million

India has amongst the highest number of India has the lowest average Enabled by mobile access, automotive India’s internet traffic efficiency (visitors/car sold)
people online and offline internet speed in APAC websites have driven large volume of
monthly visitors is much lower than U.S. or China

25 26
Pre-Owned Car And
Consumer Profile
 PROFILE OF A TYPICAL PRE-OWNED CAR A LOOK AT FUEL COMPOSITION & CAR SEGMENTS IndianBlueBook
Average age at time of
sale lies at 4 years- Fuel composition of new car sales Fuel composition of pre-owned car sales
flat through FY14-FY16
13% 17% 22% 33% 36% 47%
37% 48% 58% 53% 48% 44%

Age
63% 52% 42% 47% 52% 56% 87% 83% 78% 67% 64% 53%

FY11 FY12 FY13 FY14 FY15 FY16 FY11 FY12 FY13 FY14 FY15 FY16
Average number of prior Petrol (%) Diesel (%) Petrol (%) Diesel (%)
Average price
owners at 1- flat through Owner Price
approximately `3-4 lakhs- A sudden shift in preference towards petrol vehicles The pre-owned car market lags behind the new
FY14-FY16 Profile of an average flat through FY14-FY16 amid uncertainty over diesel car market. Unlike in sales of new passenger
pre-owned car vehicles, diesel penetration in pre-owned cars
Pre-owned car sales by segment has increased over the same period

FY16 5% 48% 17% 4% 1% 25%

Mileage
FY15 7% 54% 19% 4% 1% 15%
The share of utility vehicles is
FY14 4% 57% 23% 4% 1% 11% increasing but small cars still
account for 80% of the
Average mileage (45,000-50,000 kms) 0% 20% 40% 60% 80% 100% pre-owned cars sold
increasing over FY14-FY16, A1: Mini A2: Compact A3: Mid-size
with a greater share of vehicles
A4: Executive A5: Premium UV
being driven over 60,000 kms
27 28
 CONSUMER INSIGHTS IBB INDEX: RELATIVE PRE-OWNED VEHICLE PRICING IndianBlueBook

For more than half, a > 50% of buyers are IBB price index – prices indexed to January 2014
4% 14%
SUHRZQHGFDULVWKHĆUVWLQ working class 27%
the family 3%
41% First-time buyer Worker 5%
55% 1.20
Multiple car in family Self-employed professional 13%
Replacement buyer Junior executive 38% 1.15
Senior executive
Business-owner 1.10 1.09
Others 1.06 1.07
1.05
1.05 1.05 1.05 1.05 1.05
The buyer looks for a trusted Affordability, followed by 1.04
1.01
source and quality product value for money are primary 1.00
1.00
0.98
50% of buyers are in the to complete his pre-owned reasons why customers
25-34 years age segment 0.95 Cut in lending Cut in lending Cut in lending
car transaction consider pre-owned cars 0.95
0.94 rates rates rates
0.90
7% 11% 9% Festive season Change of year
5%
2% 1% 7% 0.85
35%
15% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
50% 17% 36% ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’ 15 ’ 15 ’16 ’16 ’ 16 ’ 16 ’16
20%
23% IBB price index, which tracks relative pre-owned vehicle price changes on a monthly basis across the
33% 29%
country, remained flat on a month on month basis in May, 2016. Trade-in activity (for car owners aspiring
18-24 years 25-34 years Product quality Trust on brand Learn driving Others to upgrade) in the months (July - September) leading up to the festive season in 2015 resulted in a decline
35-44 years 45-54 years Matching requirement Good price Affordable Value for money in the index over this period due to the effect of supply-side dynamics. Similar expectations, coupled with
>54years Good experience Others 2nd car in household favorable fuel prices and interest rates work in favor of the price-sensitive first-time car buyer
29 http://www.indianbluebook.com/ibb-index 30
 A WORD ABOUT WHOLESALE MARKETS SOURCES IndianBlueBook

1. ‘China to promote sale of second-hand vehicles’, March 2016, The Economic Times
Wholesale market by segments
2. ‘India has the largest offline population:World Bank report’, May 2016, Livemint
3. 2016 pre-owned car Market Report, Manheim
4. 2015 Used Vehicle Market Report, Edmunds.com
120,000 200,000 5. 2015 China Auto Finance Report, January 2016, Deloitte
(20%) (33%)
6. ‘SC diesel car ban has pan India sales impact’, April 2016, The Economic Times
7. ‘India car sales grow fastest since 2010-11’, April 2016, Livemint
8. OICA (http://www.oica.net/)
400,000 9. SIAM (http://www.siamindia.com/)
480,000 (67%)
(80%) 10. ‘China's pre-owned car market’, January 2014, Gordon's View, Mckinsey China
11. 2014 pre-owned car Industry Report, NIADA
12. 2015 Annual Financial Profile of America's Franchised New-car Dealerships - NADA
Repos Others (Salvage, Fleet, Dealers) Organized Unorganized
13. ‘The United States of pre-owned cars’, February 2014, The Car Connection
14. SimilarWeb (https://www.similarweb.com/)
Repossessions account for 80% of the wholesale 15. ‘Fourth Quarter, 2015 State of the Internet Report’, Akamai
market
16. ‘Driving through the urban-pre-owned car market’, February 2016, Deloitte
17. ‘China's new vehicle market:Prospects to 2019’, Automotive World
18. 2016 Internet Trends Report, June 2016, Mary Meeker (KPCB)
Two-wheelers and four-wheelers 19. ‘China’s new guidance on second-hand car sales to impact recovery rates’, May 2016, South China Morning Post
Commercial vehicles account for each account for approximately
45% of the repo segment 20. Cox Automotive research, interviews with various financial institutions and other partners
20% of the repo segment

31 32
 IndianBlueBook

Mahindra First Choice Wheels Franchise Dealer Footprint About IndianBlueBook

www.mahindrafirstchoice.com
www.indianbluebook.com
www.autoinspekt.com
IndianBlueBook (IBB) is the industry first pricing guide for new and pre-owned vehicle
valuation in India. With exclusive access to a large number of car transactions that take
place every day through different channels, IBB derives scientific and insightful
inferences that lead to vehicle price discovery. Whether you’re buying or selling a
vehicle, IBB helps you discover its real worth. Through various transactions on different
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regularly updated reviews and insights via its blog, and a platform that enables its

www.ediig.com customers to buy and sell vehicles, thereby serving as a one-stop shop for customers
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