Srinivas Kantheti of Bike Bazaar, believes India’s used 2w market is on the cusp of a major transformation, thanks to rising interest from major financial institutions.
22 Jun 2024 | 6840 Views | By Ketan Thakkar and Kiran Murali
India’s pre-owned two-wheeler market is poised to witness significant growth with the entry of large organised players and a proliferation of financing options. The market, which had been dominated by unorganised players, local small-time financers and person-to-person transactions, has now started attracting the attention of automakers and banks who sense ...
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India’s pre-owned two-wheeler market is poised to witness significant growth with the entry of large organised players and a proliferation of financing options. The market, which had been dominated by unorganised players, local small-time financers and person-to-person transactions, has now started attracting the attention of automakers and banks who sense a great new opportunity.
The Indian pre-owned two-wheeler market has clearly underperformed the pre-owned car market, despite attempts made by OEMs such as Hero MotoCorp, Honda Motorcycle and Scooter India and Royal Enfield to organise this sector. Even now, the ratio of used two-wheelers to new two-wheelers sold in India is relatively low at just 0.5 times, compared to 1.4 times for used cars versus new cars.
However, things are looking up for this business, as an increasing number of banks and NBFCs are now open to financing pre-owned two-wheeler purchases, including leading names such as IDFC First Bank, ICICI Bank and Shriram Finance.
This is driving growth in the industry. In the financial year 2024 alone, it is estimated that around 90 lakh pre-owned two-wheelers changed hands in India, generating around Rs 31,500 crore in business.
One of the major factors driving demand for used two-wheelers is the significant rise in the cost of new ones. Since the pandemic, automakers have increased the price of new two-wheelers by 30-40% over the past few years to offset the impact of raw material costs.
Another contributing factor is the rise of e-commerce. Srinivas Kantheti, Co-founder and Managing Director of two-wheeler financing company Bike Bazaar, says people involved in last-mile delivery businesses like Swiggy and Zomato have been one of the biggest buyers of used two-wheelers.
A third factor is easier access to credit. Several banks have now started financing pre-owned two-wheeler purchases, Kantheti points out. “Financing has brought in some amount of discipline into this business. Earlier, the number of vehicles that were financed was small. Today, almost 30-40% are getting financed. So, once financing comes in, things like vehicle condition, the right pricing, and proper transfer of vehicles are ensured,” he said.
Encouraged by this upsurge in demand, automakers are looking to bolster their presence in this business.
Recently, Royal Enfield relaunched its pre-owned two-wheeler business under a new name — Reown. “We see Reown as an initiative to address the issue of accessibility and trust that customers have when purchasing pre-owned Royal Enfield motorcycles,” Royal Enfield CEO, B Govindarajan said while launching the new brand. Hero MotoCorp also relaunched its used two-wheeler business under a new brand — Hero Sure, a couple of years ago. The ‘Hero Sure — Powered by Wheels of Trust’ platform aims to enable the buying, selling and exchange of pre-owned two-wheelers in a convenient, hassle-free way.
All this augurs well for the industry, and consumers, as automakers’ active intervention can help channel the market towards the organised side.
However, there are challenges too, particularly on the supply side, points out Kantheti. This is partly due to reluctance on the part of consumers towards the idea of selling their two-wheelers, made more complicated by a similar reluctance on the part of two-wheeler dealers towards pushing exchanges, unlike car dealers. “None of the two-wheeler dealers in the market is interested in buying and selling used products,” he said, attributing this to their limited access to working capital and scale.
Still, the Indian pre-owned two-wheeler market is set for significant growth going forward, as a large chunk of the population is yet to own a two-wheeler. However, this can only happen if OEMs and dealers aggressively facilitate selling and exchanges to break down the general reluctance shown by consumers towards selling their two-wheelers.
This feature was first published in Autocar Professional's June 15, 2024 issue.