How Consumer Aspirations Shape the Used Car Industry in India

In the ever-evolving landscape of India’s used car market, OLX India has emerged as a key player, connecting buyers and sellers across the country. As the industry experiences shifts driven by rising new car prices, changing consumer aspirations, and the growing presence of organized players, understanding market trends becomes crucial. To shed light on these developments, Motoarc sat down with Siddharth Agrawal, Chief Business Officer (Autos) at OLX India. In this insightful conversation, he discusses the most sought-after used car models of 2024, the unique challenges in Tier 3 cities, and how the increasing cost of new vehicles is shaping the pre-owned car market.

1) Which were the top 5 most popular models on OLX platform  in the used car space in the entire calendar year 2024?

• Maruti Suzuki Swift
• Maruti Suzuki Swift Dzire
• Maruti Suzuki Wagon R
• Honda City
• Maruti Suzuki Alto 800

2) What’s the reason behind modest growth in Tier 3 cities? Is it the sentimental value of buying a new car altogether, or is it that there’s still limited purchasing power in such regions? Or is it that the used car network isn’t fully mature in these regions?

• Limited purchasing power affects demand – Consumers in Tier 3 cities have lower disposable incomes compared to urban areas, making car ownership—whether new or pre-owned—less accessible. With an average annual household income of ₹3-6 lakh, affordability remains a key constraint, limiting demand for vehicles.

• Cultural and aspirational factors influence buying behavior – Buying a new car is often seen as a status symbol, leading many to prefer new over used vehicles.

• The used car network is still developing – While India’s pre-owned car market is expanding rapidly—projected to grow from ₹2 lakh crore in FY23 to ₹5 lakh crore by FY28, with a volume CAGR of 13% and value CAGR of 18% Tier 3 cities lag due to a lack of organized players, limited availability of certified pre-owned vehicles, and a shortage of reliable local dealers. Additionally, consumers in Tier 3 cities often prefer two-wheelers over cars for daily commuting due to shorter travel distances, which further slows the demand for used cars.

3) Are ever-increasing new car prices having an effect on used car sales? And in the context of increasing new car prices, how well are used cars holding their value?

 Rising new car prices are creating a ripple effect in the used car market, driving up the prices of pre-owned vehicles. From the consumer’s perspective, Indian buyers often compare used car prices to new car prices. Those unable to afford new cars are seen increasingly turning to used options.

On the seller’s side, when upgrading to a new car, the higher price point influences their expectations—they compare their car’s value to the current new model price and are less willing to sell at a lower cost. This dynamic is contributing to an overall increase in used car prices.