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Diesel Used Car Market Scenario - Post The SC Ban

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NGT - The Green Court

Under the aegis of the National Green Tribunal Act 2010, the National Green Tribunal was set up in October 2010. The purpose of NGT was to help accelerate disposal of any environment related cases, compensate citizens or property affected and also enforce any legal action, if required.

And in effect, it is the NGT that initially suggested a ban on large diesel vehicles with an over 2000cc engine and to also ban older diesel vehicles that were over 10-years-old. And it is this NGT order that the Supreme Court took a step further, extending this ban order for a 3-month period till March 31st 2016.

Diesel Cars Ban Image

The luxury pre-owned car market post the SC ban

For luxury car makers like BMW, Audi, JLR and Mercedes Benz, the NCR region and Delhi is the biggest market, with sales figures at a staggering 38,000 luxury vehicles.

Therefore, the SC ban on diesel engines over 2000cc affects these auto companies as the banned vehicles are equipped with powerful engines that are definitely over 2000cc.

And now, the post ban scene shows customer flutter to the used-car market for top-end makes and models that come under the ban purview.

Two sides of the same coin - The Mixed signals scenario

The present, ideal state of affairs in the diesel used car segment. The ban in a way has perked the used car market for SUVs and high-end cars, as there is definitely an interesting demand. On the one hand, consumers who love these vehicles for its very features and they cannot come in any other fuel alternative, buyers have just moved to buying used cars that is all.

Within days of the ban in force, a 27% decline in new car purchase is already witnessed for diesel SUVs, while in the used car market for the same models grew by 17%. Users are seeking diesel models of the vehicles banned as they cannot book any new vehicles for some time now. And if the ban persists, this market is definitely to boom and will set a new and interesting trend in the making.

The Post Ban Demand New Car Pre-Owned Car
Mahindra Ssangyong Rexton -23% 13%
Mahindra Scorpio -10% 32%
Mahindra XUV500 -23% 17%
Mercedes A class -61% 75%
Mercedes E class -9% 68%
Audi Q7 -36% 167%
BMW 7 series -32% 150%
Ford Endeavour -55% 88%
Range Rover Evoque -23% 50%
Mercedes GL class -24% 67%

The flipside- The doubts and fears

As per SIAM, automakers this financial year have sold 329,576 diesel passenger vehicles with engine capacity of over 2000cc. everyone is waiting for the first quarter of 2016 to pass, the March 31st deadline, and then we will know.

A high-end used car dealer in Delhi who only retails used Ferraris, Bentleys, and Lamborghinis has said inquiries have gone up by 20% since the SC ban order. But he is not in a hurry to restock as he feels that consumers’ would eventually gauge market scenarios and realign to buying petrol vehicles and as the roadmap is still a little fuzzy, present trends were short-term, till there is clarity, there is no point stocking up.

On the one hand, if the demand fuels in the used car market, then dealers will have to get vehicles from other cities or states but the catch would be to bear costs like lifetime tax, re-registering and adapting to other in-state norms. Presently, the ratio of new to used cars that are sold in India stands at 1:1.1.

Some people feel that the ban will definitely affect the used diesel cars market as older vehicles essentially have no immediate takers; people are wary and awaiting further clarity.

As per the AICDA, the All India Car Dealers Association, there are no buyers for older cars, and these sometimes form the very basis of the used car market business, and if the ban periods are extended, then these vehicles will become obsolete and outmoded and will eventually head to scrap yards and dealers will have bear huge losses.

And since it is cashing in time, most dealerships are also not really selling but holding on to their inventory because they do not have many pre-owned cars in the SUV and high-end cars segment. This sentiment was echoed by a Mahindra First Choice franchise dealer in Delhi that though it is currently a very pleasant scenario and there is a growing demand for pre-owned diesel cars and SUVs, he fears, stocks will soon be depleted and demands cannot be catered to.

The SC order takes the used car market by surprise

This unexpected sudden interest and spate of inquiries have caught pre-owned car market dealers like Mahindra First Choice, Car Trade and others by surprise. The trend definitely shows users resorting to registered, pre-owned cars as they cannot acquire new vehicles.

And in effect, if the ban continues, never know how these market equations and demands would change or if the used car market can keep pace and cater to people’s needs. Only time will tell, till such time, it is milling time in used car dealerships in the Delhi, NCR area.

Major automakers like Mahindra, Audi, Hyundai, BMW, Ford, Toyota and Tata have already started experiencing the pinch in terms of new car sales and enquiries. Their popular models like Mercedes A Class, Toyota Fortuner, Porsche Cayenne and Ford Endeavour have already started seeing the slide in sales. But on the other hand, these same models in the used-car market are seeing a boom in terms of interest generation, web page visits, online listings and adverts on popular car portals like Mahindra First Choice and IBB, Indianbluebook.com.

Wrapping up

Buyers who are keen on diesel vehicles with over 2000cc engines, SUVs or even high-end luxury cars, have not been affected by the winds of change and are not as yet moving over to the petrol variants but are instead herding to used car outlets and evincing interest and buying vehicles.

The SC order has definitely taken both consumers and automakers by surprise. As there was no inkling or even a clue that the SC would cement the Green Court, NGT’s, temporary ban with immediate effect, the dealers of the used car market are adapting to this sudden, shifting sands.

And if the ban were to be extended for longer periods, the rising demand for used diesel cars, and growing numbers on roads would in a way crush the ban intent in the first place.

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