Riding the digital wave- The used Car Market is set to boom in Australia
australia-used-car-market
May 19, 2023
Gone are the days when buying a pre-owned car was a stigma. Consumers now choose to buy certified used automobiles following thorough quality and valuation checks, which raises the volume of used car sales in Australia as a result of improved awareness. Also, with dealerships now providing warranty and service assistance, first-time purchasers have a reliable and trustworthy option in the used automobile market.
Besides, the diffusion of technology and digital enablement have boosted the overall used car market in Australia. Vertical platforms are providing consumers and sellers with new methods to interact online and assist the purchasing choice by presenting a profusion of options and focusing on the user browsing experience.
Read to know how the digital wave has been transforming the overall purchasing journey of customers and the future projection of the used car market in Australia.
1. Used to new car ratio is representative of the maturity of the pre-owned car industry which signifies the beginning of a new era in the pre-owned car market in Australia
Used to New Car Ratio, 2016-2021
Key Takeaways
- Due to the impact of COVID-19, there has been a substantial decrease in the denominator (new car sales) while the numerator, i.e the pre-owned car market, has been relatively stable
- The primary factor driving the expansion of the used car industry is the lack of original manufacturing facilities, importation of all automobiles, and lack of an assembling facility in Australia. As a result, people choose to buy used cars solely, making it difficult to balance supply and demand.
- Used to new car sale is rising as used vehicle models have lots of the latest technologies that large families can easily accommodate and enjoy good features & new technology at relatively low rates compared to the new vehicles.
Source: Industry Articles, Industry Report & Ken Research Analysis
2. End users usually have a variety of options in choosing different platforms such as multiband, captive & unorganized dealerships along with online platforms for purchasing a used car
Individual Car Sellers
- These people are the car owners who are willing to sell the cars.
- 1.8 Mn used cars were sold in 2021 as used cars in the market on the basis of sales volume.
- They are the biggest suppliers of used cars in the Australia Used Car Market, and usually use online platforms such as GumTree and Auto Trader, among others for listing their vehicles or trade-in with other vehicles.
Dealerships
- Dealerships include the multi-brand, captive dealerships of OEMs and unorganized dealers.
- Most of the used car are sold through dealerships, via placing car inventory at their stores or posting an advertisement on online platforms.
- Due to presence of large number of unorganized dealers, customers have an opportunity to shuffle between multiple dealers before deciding the model and brand to purchase.
Online Platforms
- Online platforms like GumTree, Car sales and Auto Trader offer listing of vehicles on their platform by the car owners directly.
- Online platforms operate on the basis of:
- Consignment Model: used car is held till the time it is sold to an end user and related charges are taken up by the owner.
- Profit margin Model: purchasing of used car by the platform itself and then selling it to the end user at higher price.
End Users
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- End users are the people to whom a used passenger vehicle is sold.
- Consumers who require car for short duration but lack finance capabilities for new car, opt to purchase used car with affordable ranges
- Additionally, end users can also be business entities such as car rentals, taxi services or corporations willing to purchase used cars in bulk.
Source: Industry Articles, Industry Report & Ken Research Analysis
3. Here, Social media plays a major role in generating leads for dealers & end consumers by virtue of offering advertisements at a lower cost with respect to other traditional marketing channels
Car Dealers
Walk-ins
- Most preferred channel of purchase; vehicle directly sold to customer with no middleman involvement.
- Customer completely aware of vehicle’s condition before purchase.
- Sold to people within the circle (known people).
1
Blogs/ YouTube
- Car dealers use blogs to generate traffic to their website from search engine results pages.
- They often put up educational content related to cars maintenance, help guides, knowledge material in order to create a brand presence.
2
Online Portals/ Market Place
- Partnership with online platforms to supply used cars to customers.
- Online portals follow lead generation process, sellers list cars and company facilitates the overall transaction of acquiring the vehicle.
- Other Services include loan, checks and verification.
3
Facebook/ Social Media
- Unlike online portals and market places, social media provides an opportunity to dealers to advertise their cars for free.
- This platform is also used by individuals involved in C2C purchases.
- Also, major dealerships use this platform to announce promotional offers and local events
4
Source: Industry Articles, Industry Report & Ken Research Analysis
4. However, there still remain some concerns to customers but Online auto portals are emerging and providing a wide range of services to address those problems and driving the growth of the sector
Pain Points
- Tedious process of looking for interested buyers & communicating with them as sellers may not always have the time & may look for convenience
- Market dominated by unorganized sector and unverified sellers leading to susceptibility to scams and trust issues.
- While purchasing from small unorganized dealers, buyers do not get any additional service offerings such as inspection report, warranty, insurance etc
- Buyers have to go through Tedious Re-Registration & Transfer Process, when they opt to re-registering the vehicle
- Before purchasing, buyer schedule to visit the seller to inspect the car which is a time taking process that depends on mutual decision of both seller and buyer.
Solutions
- Many auto portals are now enabling sellers to sell their cars directly to dealers through online bidding, reducing lead time for sellers
- Auto portals often highlight trusted sellers on their platform, which leads to higher customer confidence
- Online marketplaces often offer additional services such as detailed car inspection & vehicle history report, after-sales & value-added services including warranty, insurance, ownership transfer assistance etc.
- Online Marketplace will help the buyer by supporting with the Registration procedure for Online registration
- Auto portals are now setting up inspection centres in major cities where customers can come & immediately sell their car post inspection
Source: Industry Articles, Industry Report & Ken Research Analysis
5. Presently, the Used Car market in Australia is in the growth stage and has a high potential to grow with double-digit CAGR in future owing to the rise of online platforms and enhancement in online infrastructure
I: Emerging Phase < 2010
- A car industry was created in Australia in the 20th century through the opening of Australian plants by international manufacturers.
- Sale/Purchase of used cars via C2C channel, local dealerships or outlets.
- Most of the transactions for automobiles in the country took place through offline mode.
- No strong presence of Online Auto-Classifieds due to lack of digital literacy
Sale and Purchase of Used Cars via C2C, local dealerships or outlets.
II: Growing Phase 2010 - 2035
- Used car market is in overdrive with a shortage of vehicles leaving dealers chasing former customers to offer competitive buy-backs as they scramble to fill their lots.
- New and used car market is experiencing unprecedented demand, due largely to supply chain issues
- Emergence of number of Unorganized and Online-Auto Classifieds such as Gumtree and Carsales etc., with increasing internet penetration.
Emergence of Online Platforms and shortage of vehicles
III: Maturity Phase < 2035
- With enhancement in online infrastructure, used car market is expected to be driven by Online-Auto Classifieds
- Customers are expected to increasingly pivoting towards online channels to conduct their used car purchases
- Market consolidation is expected with the emergence of new technology and players.
- Additional Online services provided including vehicle selection, online payment, applying for loans and others
Foundation for further future disruption and emergence of new Tech
Market Landscape
- Growing Stage
- CAGR: ~12% (2021-2026F)
Nature of Competition
- Moderately Fragmented market with presence of major Multi Brand Franchisee dealer dominating the market.
Source: Industry Articles, Industry Report & Ken Research Analysis
