CHENNAI/NEW DELHI, Jan 28: General Motors India Ltd (GMIL) is exploring possibilities of foraying into the second-hand car business. Though a final decision is yet to be taken, company sources said a move into the used car market would be a "logical course to take." "We are certainly looking at the segment, but things are still at a nebulous stage," company sources told The Financial Express."If we decide to get into the used car market, the first step will be to tie up with a finance company to provide the necessary working capital to our dealers," sources said.
Some of GMIL's dealers already have a marginal exposure to the used car business through exchange offers.
But if GMIL decides to enter into the second-hand car market, it would perform support functions like financing dealer's inventory, while actual operations would be looked after by the dealer. "Besides setting up showrooms for used cars, dealers may also offer a warranty," a company source said. "There is a clear need for a strong brandin the used car market in India. I think General Motors can bring in the credibility needed to fill the void," the source said.
Internationally, most car manufacturers encourage their dealers to deal in used cars too. "Though customers wanting to exchange their old car for a new one haggle a lot over the price of a new car, they are willing to compromise on the valuation of their used car. This gives the dealer room for leverage," sources added.
Dealers will have other advantages too. Decent spreads that are there for the picking in the second-hand car business, will help them augment margins. This comes in handy in sluggish market conditions such as the one prevalent in the country today. Secondly, dealers will be in a position to provide an additional service to the customer.
The used car market scene in India is currently dominated by small operators, mostly from the unorganised sector.
Maruti Udyog dealers have recently decided to get into the business. Other car manufacturers are also likely tofollow GMIL either directly or through their dealers.
This, industry sources feel, will benefit prospective buyers of used cars. The entry of respected names will make finance companies more open to advancing loans for purchase of second-hand cars.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
