The entry-level car market is struggling to revive and the booming used car market could be one of the major reasons impacting the sales of new entry-level cars.
“There is pressure possibly from the used-car industry on the entry-level segment. There are structural changes, which seem to be happening,” Shailesh Chandra, President of the Society of Indian Automobile Manufacturers, told reporters.
The demand for entry-level cars, or small cars, which were once the major growth driver for the new passenger vehicle industry, has been among the most impacted after the pandemic.
The current growth in the passenger vehicle industry is being fuelled by strong demand for sports utility vehicles, while small car sales have been declining, amid rapid increases in the cost of vehicles.
On the other hand, the used-car market has grown significantly over the last couple of years. The industry is estimated to have sold over 5 million units in 2023-24, compared with around 3 million units in 2026-27.
The rise of certified pre-owned programs by OEMs like Maruti Suzuki’s True Value, Mahindra & Mahindra’s First Choice, Volkswagen certified pre-owned, and online startups like Spinny and Cars24 along with better financing options, has aided growth in this segment.
“The used car industry has gone (to) 5 million plus, and the average selling price is around Rs 4.5-5 lakh. So it is directly competing with the new entry-level cars in the industry,” said Chandra, who is also the managing director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility.
“Intuitively, it feels that it (used cars) impacts the new car sales. Because the cars in supply are not that old also. So for the same price, if we get a bigger car in good condition with some level of warranty offered by some organised players, it becomes appealing.”
With the substantial rise in new entry-level car prices, consumers are now paying a premium for the size and features they desire. As a result, many are turning to pre-owned cars as a more affordable option.
The weakness in the demand for entry-level cars is a major reason by the overall new passenger vehicle sales are on a slow lane.
Market leader Maruti Suzuki has said that the growth of small cars is essential for the sustained growth of India’s passenger vehicle market as it attracts more first-time buyers to the market. The automaker expects the entry-level car market to pick up from next year.