This is an incredibly dark period for new-car biz: Anand Mahindra

The passenger vehicle industry is facing its worst slowdown since liberalisation. Is the used car business unaffected?

This is an incredibly dark period for new cars but our hunch is that the used car business is counter-cyclical with very little volatility. So it wouldn't boom as much as new car sales nor will it slide as much during a downturn which makes it an excellent business to be in because it is predictable. Of course, after a time lag used car sales will decelerate if new car sales slow down but the volatility is much less and even with deceleration there is growth. Demand is not the problem in this industry; what is important is who is better at execution. The Mahindra ecosystem in financing and our relationship with OEMs all come in handy in this business but ultimately how many businesses in India today can say that demand is not a problem in this pervasive gloom.

A big problem for the organised used car market is financing at rates competitive to new cars. Can that be fixed through Mahindra Finance for instance?

Worldwide, the financing model for used cars commands rates that are higher than new cars. The good news is that banks are looking to grow the market. Mahindra Finance is lending to a fair percentage of First Choice Wheels customers. It's a competitive market out there, and as more and more finance companies get interested in financing used cars, it will get even more competitive even vis-a-vis new car financing.

Anand Mahindra with Rajeev Dubey, president, After Market

Is an entry-level ultra low-cost car still a viable and attractive option or can used cars cater to that segment just as well?

I remain firm in the conviction that Mahindra's entry or presence in entry level cars will be through Mahindra First Choice. In many parts of the world, the first car and the entry-level vehicle is a used car. Customers buying their first car may not necessarily be looking for a small car but an inexpensive one. That's a fundamental insight. If a 3 or 4-year-old sedan is cheaper than anew hatchback, the customer may want to go for it. Rajeev (Dubey, president-after market ) is selling a lot more cars in his ecosystem than a lot of people selling entry-level cars for example. And 65% of those customers are first-time car buyers. Ibelieve that people who get prosperous fast, buy sedans. As money trickles down, people buy small cars but the boom in the small car happens when the sedan customers go in for it as the second car. That way a bells and whistles small car may be the way to go at this point, given the business downturn. As for us, in the used car business we are nicely derisked because we are brand agnostic.

Has the rupee slide made the used car more attractive?

Yes in a sense. As import heavy cars become more expensive due to the currency situation, used cars should become more attractive.