The Hindu Business Line : Tough going for second-hand two-wheeler dealers

Changing scenario
Old-for-new exchange offers as part of sales promotion strategy
Easy finance option prevents people from going in for a used vehicle
Drop in business results in lower margins and cutting down number of workers

BAD DAYS: With the availability of easy finance scheme, sales of second-hand motorcycles have seen a slump. For this outlet, one in about a 100 in the Karol Bagh area, sales have dropped from a 1,000 bikes a week to 1,000 bikes a month. — Kamal Narang

New Delhi May 7 Inflation, hardening of interest rates and movements in other macroeconomic variables hardly matter to them beyond a point. For the dealers operating in the country's largest second-hand two-wheeler market at Karol Bagh in Delhi, it is a story of falling business and cutthroat competition all the way.

With the biggies — Hero Honda, TVS, Bajaj, Yamaha — coming out with old-for-new exchange offers as part of regular sales promotion strategy, crowded second-hand car and bike markets such as Karol Bagh have steadily lost out.

Established way back in 1960s, Karol Bagh once boasted of 400-500 dealers in second-hand two-wheelers. But over the last decade the number has shrunk to 200-250.

Explains Mr Om Soni of Shakti Auto Sales, "Till five to six years back, each of us sold around 80-100 bikes a month, and this would go up to around 125-130 during the peak season. But now anything between 30-40 vehicles a month is considered good business."

According to him, if one were to go about 10 years back, sales were close to around 10-15 vehicles a day and on some occasions people had to wait for a week after making the payment to get the delivery. In fact, at one point of time this was the only market in the country that used to deal in second-hand vehicles.

"Nowadays mostly people who want to buy a bike prefer to go in for a new one. Second-hand bikes come between Rs 20,000 and Rs 35,000, whereas a brand new one is available at a slightly higher price," said the salesman at Tony Bike Centre.

Rising production

Another reason for the dip in sales is attributed to the increase in production. "Most of the companies these days produce vehicles which are not only enough for the domestic market but also cater to the export demands. So even if a person wants to change the model, companies are offering easy exchange options. So why would any one want to go in for a used vehicle as a first option," said a dealer.

"Then there is also the question on pricing. While there are several payment options with low interest rates when one purchases a new bike or goes in for an exchange, the costs go up quite substantially for a used bike as most of it is done through private channels and very little through banks. Earlier only around 50 per cent could be financed but now with the drop people are ready to finance up to 80 per cent of the money required," Mr Soni added.

According to him, the drop in business has also resulted in lower margins and cutting down the number of workers.

Young customers

So who are their clientele under these circumstances? "Most of our customers are college students. As most of them cannot afford a new vehicle they are satisfied with a second-hand vehicle. Then we also have people who want higher end bikes which are available between Rs 30,000 and Rs 50,000 where a new one is priced above Rs 70,000," Mr Soni said.

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