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Certification: Much awaited boon for used cars - Views on News from Equitymaster
 
 
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  • Aug 7, 2000

    Certification: Much awaited boon for used cars

    The second hand passenger car market in India is still in its nascent stages. Since the past few years automobile dealers and companies have been providing valuation and advice to consumers, however this has been more or less in an informal way.

    However for the first time in India three companies have got together to offer certification and financing of used cars. This process would give reliability to both sellers and buyers of used passenger cars. GE Countrywide, Maruti Countrywide and Automartindia have got together to encash on this growing market, by pooling in their resources. GE Countrywide and Maruti Countrywide will decide the loan values for used cars based on their financing experience while AutomartIndia will provide the certification for these cars.

    This move should give the much needed impetus to the second hand passenger car market as consumers earlier skeptical of buying used cars, will feel more comfortable doing so now. This process could result in a shift from two wheelers to four wheelers and sales in the second hand car market could pick up. This will also lead to higher volumes in the new passenger car market as consumers will be able to change cars more frequently, than they were doing earlier. Many consumers have been wary of buying passenger cars due to the fear of selling them in future in the unorganised market, and instead have been taking cars on lease. Certification can get rid of these fears and encourage customers to purchase cars.

    Buoyant passenger
    car sales
    Unit nos. % growth
    FY95 264,822 -
    FY96 345,486 30.5%
    FY97 410,992 19.0%
    FY98 417,736 1.6%
    FY99 409,624 -1.9%
    FY2000 639,000 56.0%

    On the whole the passenger car segment has been doing well over the last couple of years and volumes have picked up considerably. The main drivers for this have been easy availability of auto loans, 100% auto finance available currently as compared to only 70%-80% earlier, migration from two wheelers to passenger cars and financing options available for second hand cars. Over the past year a pick up in the domestic economy and reduction in dealer inventories has boosted car volumes.

    In the current year there is a slowdown in the passenger car market as there is in other segments of the automobile industry, due to imposition of uniform sales tax.

     

     

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