Academic journal article IUP Journal of Marketing Management

Purchase of Pre-Owned Small Cars in India: An Exploratory Study

Academic journal article IUP Journal of Marketing Management

Purchase of Pre-Owned Small Cars in India: An Exploratory Study

Article excerpt

India is the one of the top 15 largest passenger car markets globally, and is expected to be among the top 10 markets by 2016. Post-liberalization, many foreign manufacturers have set up their operations in India. The latest trend of new cars on the Indian road has led to the emergence of an entirely new market in the pre-owned cars segment. It is expected that the small car segment is set to grow at a Compound Annual Growth Rate (CAGR) of 15-16% in the next five years. Also, the pre-owned car market is set to grow at a CAGR of 18-20% till 2015, and small cars dominate the pre-owned car market as well. Though the unorganized segment dominates the pre-owned car market, the organized market also has been gaining momentum. About 75-80% of the transactions in the pre-owned car segment occur in the unorganized sector, and the organized players account for only 20-25% of the pre-owned car market. This study aims to identify the factors influencing the buying behavior of customers towards the purchase of pre-owned small cars, and to analyze the preference of customers towards the organized and unorganized market during the purchase of pre-owned small cars. 'Budget constraint', 'cheaper than a new car', 'upgradation of driving skills' and 'desire to own a car' were the important factors that influenced the purchase of a pre-owned small car. Clear title, negotiation, and mutual trust were the important reasons for preferring the unorganized market for the purchase of a pre-owned small car, whereas the respondents preferred the organized market due to clear title, professional assistance, genuine spare parts, certification, and easy availability of after-sales service.

Introduction

Post-liberalization, almost every global car manufacturer is eyeing the Indian market. The Indian automobile industry is geared up to invest up to 80,000 cr in fresh capacity in the next four years. The Automotive Mission Plan is a 10-year road map prepared by the Indian government in 2006 to make India an automobile hub, raise the industry contribution to the Gross Domestic Product (GDP) from 5% to 10%, and provide additional employment to 25 million people. Car sales in India are setting records with rising incomes, cheap lending by banks and launch of new models.1 The domestic market share of different segments of the automobile sector is: Two-wheelers 76%, passenger vehicles 16.25%, commercial vehicles 4.36%, and three wheelers 3.39% in 2010-11.2 Asia pacific markets-China and India-are the backbone of the global automotive industry. These two countries would sell enough vehicles on their own that would take the global markets out of red. The emergence of India in the global auto scene has seen world's top automakers such as German Volkswagen AG, Man Motors, BMW, Audi and American Navistar International, starting their local operations to cater to the booming market.3 Different segments are emerging in the car market, for example, a niche car concept segment where re-modelers cater to the individuals who wish to remodel their vehicles to create concept cars for their use. Contrarily, a segment is also emerging comprising people who wish to upgrade to cars from two wheelers. Tata motors has already launched the small car 'Nano' to suit this segment's needs. Some of the important reasons for the impressive growth of the Indian car industry are: easy availability of finance, attractive rates of interest and convenient installments (Phanse, 2008). These schemes encourage people to go in for loans to purchase cars of their choice. The trend is to get rid of the vehicles that defined them as part of the earlier segments and buy cars that identify them with the newer segments. Apparently, the desire for newer cars and models is yet another reason. This makes them sell their current cars for reasonable resale values. This phenomenon benefits those who want to buy cars but are not able to afford new ones. The latest trend of new cars on the Indian road has led to the emergence of an entirely new market in the pre-owned cars segment. …

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