Merc, BMW to debut in used car business

German luxury car manufacturers, Mercedes Benz and BMW, will soon venture into the used car business in the country. While Mercedes, which has been in India for more than a decade, is announcing its plans for used cars today, BMW is expected to follow suit in a couple of months.

While this will enhance the customer base for these companies in the country, people with limited budget but an aspiration for super-luxury cars can now upgrade. The cars are expected to be 50-60 per cent cheaper than their brand new versions which start from Rs 25 lakh.

This means that a three-to-four year old Mercedes Benz C-Class, which is now priced at Rs 28 lakh and has been driven for around 50,000 km, can now be bought at less than half the price, or at the price of Honda Civic or Corolla Altis.

"While the final details are still being worked out, we will set up two dedicated showrooms for pre-owned luxury cars in Gurgaon and Chennai. We hope some of our existing customers can now upgrade to new cars," a BMW spokesperson says.

According to industry estimates, while there are less than 8,000 BMWs in the country as the company started operations here only in 2007, Mercedes has a customer base of around 30,000-35,000. All these owners are the target audience for the profitability of the used car venture.

"It makes more sense for Mercedes to foray into the used car business as their customer base will extend further. Also, BMW might benefit if some of the existing Merc customers decide to own a BMW after selling off their old Merc," VG Ramakrishnan, senior director (automotive), Frost & Sullivan says. It is estimated that the buyout would be more dominant for locally assembled cars like the Mercedes Benz C, S and E-Class and the 3 Series and 5 Series of BMW India.

According to Abdul Majeed, head (automotive practice), PricewaterhouseCoopers, the profitability of this venture would be higher for Mercedes Benz India as their older cars could have high depreciation and therefore would be cheaper by 60-70 per cent vis-à-vis new cars.

This would be the first time that India will have dedicated showrooms for pre owned luxury cars in the country. Mass market players like Maruti Suzuki, Hyundai Motors have been selling branded used cars through their dedicated outlets like True Value or Hyundai Advantage respectively.

"Used car segment is something that every car manufacturer in the country would like to explore, depending on the initial volume base. Now these two big luxury car makers in the country seem to have a desired car park to make the business viable. Moreover, since these cars would be certified, it will boost buyer confidence as well as help companies to keep up the resale value of their cars," Rakesh Batra, national head (automotive practice), Ernst & Young says.