Sensing a growing market, premium truck maker Volvo is taking a plunge into the used-truck market this year, similar to its competitors Tata Motors and Ashok Leyland.
According to the plan, Volvo will buy used tippers, which are used in mining and construction, from its customers at an agreed price and refurbish them internally and externally, before reselling them to a new buyer with a six-month warranty.
Experts believe that this would make a valuable business proposition for the company to make its trucks more affordable, which are otherwise priced substantially higher than trucks by Tata Motors or Ashok Leyland.
Eric Leblanc, managing director, Volvo India, said, "We have found some Volvo tippers in India with about a million kilometers clocked on the meter and still running quite well on the roads. The demand for our trucks is huge and we will tap it through the venture in the used vehicle segment."
The cap on the age of the vehicle to be bought from the original owner will be about five years.
The vehicle will then be sent for a thorough examination with complete checks carried out in the engine, suspension, drivetrain and exterior departments.
Even as though the price of a used Volvo will be substantially lower than its original selling price, the vehicle enjoys lower depreciation charges thanks to its strong brand value.
It remains unclear whether Volvo will extend this business model to its bus segment, however the company may look to address it in the future, said a company official, as demand for Volvo-branded buses are as high as its trucks.
"A 3-4 years old Volvo truck, which was bought at a price of Rs 45 lakh will still have a resale value of at least Rs 25 lakh. This will position it higher than an (new) AMW (truck)," said LeBlanc.
The heavy commercial vehicle (HCV) segment saw sales of 1.84 lakh units this financial year and 2.75 lakh units last year with a growth of 32 per cent. Unconfirmed reports suggest that the largely unorganised used-truck sector sold more than 200,000 units in this segment.
Ashok Leyland, with a market share of 26 per cent in the new vehicle market, had recently initiated a move to retail its used trucks through its existing dealer network.
The business model, called Altrux, is looking to grab 10-15 per cent of the market share in three years. The company will thus source five-year-old trucks and sell them at half the cost of the new vehicles.
Analysts expect the used CV market to grow anywhere between 18 and 25 per cent annually. "With OEMs getting into the used market, consumers will get much-desired product assurance from the manufacturer, similar to those provided by True Value outlets by Maruti. Although it is too early to predict the growth of this business model, the industry itself can grow substantially," added an analyst.