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CV makers also want slice of meaty second-hand pie

23 August, 2015, The Financial Express

The successful run of company-owned channels to retail pre-owned cars has now led commercial vehicle manufacturers to also give a push to such sales. The country’s largest commercial vehicle manufacturers, Tata Motors and VE Commercial Vehicles (a joint venture between the Volvo Group and Eicher

Motors), have reinforced their thrust into retailing pre-owned commercial vehicles through their respective outfits – Tata OK and Eicher Sure.

The basic idea behind scaling this stream is to cut into the market of the unorganised sector, which dominates such sales, and connect with the customer base, which helps in sales of new vehicles. Also, during slowdowns, when sales take a hit, second-hand sales come in handy.

“Like in the passenger car segment, second-hand truck buying is likely to emerge as a profitable business extension for commercial vehicle manufacturers. The second-hand market in the CV segment is growing today through middlemen sales where there are no standardisation of pricing and quality checks,” says

Vinod Aggarwal, CEO of VE Commercial Vehicles. “With commercial vehicle manufacturers like us planning to directly engage in the second-hand market through our dealer network, the industry is likely to get a huge boost,” he adds.

However, currently sales through such outlets are very small. For instance, Tata OK, which started operations in 2012, is confined only to south India. But it plans to spread its branches across north India too this year. In FY15, Tata OK sold 12,000 certified vehicles, 80% of which were in the small and light commercial vehicles category.

Similarly, VE Commercial Vehicle started Eicher Sure in 2013 and has sold over 1,500 used heavy duty trucks till date. The company is aiming to cover 70% of its dealers under the Eicher Sure network by 2016 and will also extend the scheme to light to medium duty trucks in the last quarter of the current financial year.

The model is similar to the used cars one. Tata OK, for instance, gives warranty for vehicles that are seven years’ old. Eicher Sure currently does not offer any warranty, but plans to shortly introduce it for up to seven-year-old vehicles. There is also a provision for exchanging the old vehicle if a fleet owner is

buying a new one, with the money it gets acting as margin money for buying a new one. VE Commercial Vehicles said around 8% of their sales happens through such exchanges.

“There is huge potential in the used commercial vehicle market as this space hitherto is dominated by brokers and agents. Besides additional revenues, establishing connection with the used vehicle buyer will help manufacturers to convert them into buyers of new products,” says Abdul Majeed of PriceWaterhouseCoopers.

Tata Motors has separate showrooms for selling used vehicles, while at some places the dealers showcase pre-owned vehicles at the same location.

“For customers it helps encourage single-window solution for purchase of used trucks, providing convenient finance options. It also contributes in increasing revenue streams for our dealers,” Aggarwal says.

Though no detailed data for the used trucks market is currently available, analysts expect the market to grow with the entry of major players. “The organised market for used trucks is not very big currently, but it is expected to grow. Currently, there is trust deficit between buyers and sellers. As the OEMs get involved in the transactions, the market will see a boost,” Majeed feels.

In the April-July period, the segment has seen a robust growth of 24.86% in domestic sales. In July itself, the growth has been 29.49%.

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