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Old 6th November 2008, 15:51   #1
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Default Economic Slowdown a Boon For Used Car Business!!

It seems, in contrast to the slump in the new car business, the used car market has shown promising growth. This is despite the credit crunch.
Please go through the excerpt of the article in Economic times.(Web Edition)
Read Full article at :Used cars driving in fast lane- Automobiles-Auto-News By Industry-News-The Economic Times

Excerpt:"
The current slowdown has proved to be a blessing in disguise for the used-car industry..... However, if there is one segment that has gained from the present scenario, it is the second-hand car market, which has grown by over 30% this year. Says Maruti Suzuki True Value chief GM (sales & support) Ravi Bhatia: “We have grown by 30% in March-September this year over the same period last year.” Maruti Suzuki’s True Value is the biggest player in the organised second-hand car segment. It sold 1,03,000 used cars last year. Similarly, Honda Siel Cars’ used-car venture, Honda Auto Terrace, has also witnessed a growth of 34% this year. Says Honda Auto Terrace head Sunil Gambhir: “We have seen sales spiral thanks to the slowdown. While Honda City is still a hot-seller, it is followed by Accord. Consumers are also going for Honda CRV SUV.” Sensing the opportunity at hand, Honda Siel cars is going to spend Rs 2.5-crore on advertising Auto Terrace in this financial year.
Mahindra First Choice has also seen a 45% increase in sales this year. The company aims to sell 18,000 used cars this year. Says M&M head (new business development) Vinay Sanghi: “We will be spending about Rs 15 crore as marketing spend this year to strengthen our brand, up from Rs 10 crore last year.”
Even those in the unorganised market are gaining. Says a New Delhi-based used-car dealer RS Rana

Last edited by Technocrat : 6th November 2008 at 15:56. Reason: Removed color & font tags
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Old 6th November 2008, 18:41   #2
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I don't know, but a talk recently with a second's agent/dealer presented to me the scenario that crisis has hit used car market also.

He said that most of the guys who used to come to him took loans from bank (either directly or thru him). And these days the banks have refused to process the "files".
Leading to slower disbursement of loans.
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Old 6th November 2008, 19:00   #3
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Quote:
Originally Posted by alpha1 View Post
I don't know, but a talk recently with a second's agent/dealer presented to me the scenario that crisis has hit used car market also.

He said that most of the guys who used to come to him took loans from bank (either directly or thru him). And these days the banks have refused to process the "files".
Leading to slower disbursement of loans.
alpha,

Despite the lower disbursement of loans the segment has seen growth. So it must mean that most of the deals in used cars aren't financed, atleast nowadays.
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Old 6th November 2008, 20:24   #4
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The slowdown has just begun to set in, companies have been posting rocking last quarter results (check SEBI data/anounced results) which just ended but if you talk to CFO's unofficially payments from clients have stopped they are facing cash crunch, all statistics and examples such as Mahindra etc are figures from last quater/year are unrealiable as far as the future goes, I would go by the firsthand info ALPHA1 is quoting. Anyway each segment will have what is commonly called leakage and cross over be it new or old, higher and lower price point. what is inevitable is all are going to be hit hard!!
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Old 6th November 2008, 21:50   #5
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Default Then why the increased ad spend

Dear Canonball,

If the companies have started to take the hit, why would they increased ad spend, wouldnt be they take measures to cut down on expenditure.
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Old 7th November 2008, 03:03   #6
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Some of the used car priced that I have seen listed in the US are a golden oppurtunity to close on your dream machine.
e.g:2 year old M5 done 35k miles for below 45,000$ !
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Old 7th November 2008, 06:41   #7
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  1. Some of the prospective buyers of new cars would have settled for the pre-owned market - +ve
  2. Loan processing and individuals going after loan would go down –ve
  3. People tend to keep their existing cars rather than changes bringing down the volumes –ve
During the initial days of slump, point 1 above has higher impact. So there could be a higher sales but if the slump stays on, point 1 will die and the next 2 points take over and the sales will also dive down.
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Old 7th November 2008, 11:44   #8
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Default economic times !!

ET does it again - just for the sake of carrying some article that ppl wud read...

thanks to slowdown, people are not selling their cars to upgrade - so supply of used cars is down

finance costs are high - even higher for used cars -banks not willing to lend for used cars

put all of this together - there is a slowdown in used cars also

ET just takes some data from somewhere - goes and takes a quote from a few people and puts up an article..

very bad reporting from ET as always
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Old 7th November 2008, 12:46   #9
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Quote:
Originally Posted by sureshkishore View Post
Dear Canonball,

If the companies have started to take the hit, why would they increased ad spend, wouldnt be they take measures to cut down on expenditure.
Sureshkishore

Adspends are being made becasue there is no offtake and inventories are piling up. If your cars are selling like hotcakes you don't need to advertise!!! More adspends means they are desperate to grab your attention for that matter the attention of the few who may be still buying. These are early days my friend dosen't seem like you have experienced and felt the pain of past economic down turns?
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Old 7th November 2008, 16:04   #10
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Originally Posted by canonball View Post
Sureshkishore

These are early days my friend dosen't seem like you have experienced and felt the pain of past economic down turns?
lol cannonball. You sure seem to have more experience with such economic slumps. So I take your opinion on it. But still on a positive note even if the business takes a hit, there would be some great used car deals in the market. Say, a OHC VTec For 2Lac. Provided you have the cash with you even in this crunch time.
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Old 7th November 2008, 16:15   #11
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Quote:
Originally Posted by sureshkishore View Post
It seems, in contrast to the slump in the new car business, the used car market has shown promising growth.
i don't think so suresh, i very recently had an enquiry on my 2007 NHC MT, and the dealer offered 6.25 lacs as max amount and he said three months before they have offer 6.6lcas for the same model.

Due to the market slump the rates have come down and another reason is that the bank's that did car financing are now going slow and some banks have stopped second hand car loans altogether, due to which private bankers have come in and the interest rates are more than the normal bank rates and they are actually in more crisis
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Old 7th November 2008, 23:08   #12
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i don't think so suresh, i very recently had an enquiry on my 2007 NHC MT, and the dealer offered 6.25 lacs as max amount and he said three months before they have offer 6.6lcas for the same model.
Hey as I said earlier for those who were not fortunate to own flashy rides earlier would now be able to afford them this would actually drive the market.. This logic may sound stupid. But for me it worked, I had been thinking of buying a new car, could anly afford an alto but came across a great 2.5 year old Baleno for 3.25L and grabbed it. So there could be many like me who would think this way.
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Old 8th November 2008, 16:13   #13
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Hey Suresh now you are thinking in the right direction cash is king now and if you have it you can push hard for good deals and dealer get of their high horse and keep things real!! cheers
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Old 8th November 2008, 17:04   #14
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I don't know where they compiled the data from but most of the people who would opt for a new car in normal circumstances would not settle for a used one. It's a psychological thing and in all probability he may postpone his car buying decision till things improve.
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Old 10th November 2008, 15:18   #15
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That’s right. Economic recession has led to liquidity crunch and vehicle financers are not giving loans to car consumers. This has forced many consumers to buy used cars as they are cheaper than the new cars. But on the other way I think how consumers are financing used car. Even that needs cash. Frankly speaking I am confused.

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