India’s used car market is on track to cross 6 million units in sales this fiscal, fuelled by value-conscious buyers, increasing digital adoption and improved access to finance, according to a report by Crisil Ratings.The surge has pushed the used-to-new car sales ratio to 1.4, up from below 1 five years ago, with volumes growing at more than twice the pace of new car sales.After a modest 5% growth between fiscals 2017 and 2024, used car volumes rose by a robust 8% last year, and Crisil expects growth to touch up to 10% this fiscal.The market value of these vehicles is pegged at around Rs 4 lakh crore, nearly matching that of new car sales.While organised players in the sector continue to incur high operating costs, mainly due to refurbishment, logistics and financing, the segment is in expansion mode and yet to turn profitable. But Crisil expects strong revenue growth to drive breakeven at the operating level this fiscal or the next. In the meantime, the credit health of companies will rely heavily on timely fund-raising and sufficient liquidity to support expansion.Anuj Sethi, Senior Director, Crisil Ratings, said, “The improvement in the used-to-new car sales ratio to 1.4x from under 1.0x five years ago signals a structural shift, driven by rising consumer confidence and digital adoption. The supply too remains strong with average age of used cars steadily dropping and is expected to reach around 3.7 years, reflecting quicker upgrade cycles and growing preference for utility vehicles, mirroring new car trends.“The report noted that India still lags behind mature markets, where the used-to-new car ratio stands higher, 2.5 times in the US, 4.0 in the UK, 2.6 in Germany and 3.0 in France, suggesting there is ample room for growth.Used car sales also held firm during the pandemic and global semiconductor shortages that hit new car production. With fresh delays now caused by rare earth magnet shortages, buyers are turning to pre-owned vehicles for faster availability.The post-pandemic rise in new car sales has also expanded the range of available used vehicles, a boon for first-time buyers. In addition, lender-platform tie-ups and AI-led underwriting have eased access to vehicle finance, further supporting the shift.While the sector has grown rapidly, profitability remains a challenge for organised players.Poonam Upadhyay, Director, Crisil Ratings, said, “High cost of customer acquisition, logistics and refurbishment continues to weigh on the operating margin, which remains thin or negative for many players. However, the shift towards integrated service offerings including inspection, refurbishment, financing, insurance, and doorstep delivery, along with tighter cost control, should help narrow the losses down gradually. If the current momentum on cost agility sustains, most players are likely to achieve an operating breakeven over the next 12-18 months.”According to Crisil, most players have enough cash reserves from earlier fundraising rounds to meet operational and capital expenditure of Rs 800–1,000 crore this fiscal, with a focus on expanding inspection hubs and strengthening tech infrastructure.Since fiscal 2019, organised players have raised more than Rs 14,000 crore through equity. But in the past two years, the emphasis has shifted towards improving profitability and operational efficiency, leading to more selective fundraising.Bank credit remains constrained due to ongoing cash burn, but Crisil expects a pickup, especially for inventory-led businesses with tangible collateral.Looking ahead, the report said the used car market is likely to remain structurally stable, but availability of quality inventory will be a key factor to watch.
