Do Legacy OEMs Face Declining Relevance in the Pre-owned Passenger Vehicle Industry?

The following analysis of the pre-owned passenger vehicle market dives into the top influencers of residual value in India, highlights key brand-wise and segment-wise trends, and explores how EVs, hybrids, and tech-savvy models are redefining the future of used car valuation.

India’s automotive landscape is rapidly evolving, with the used car market becoming a key driver of consumer choice and industry momentum. As affordability, digital platforms, and trust in pre-owned vehicles rise, buyers increasingly view used cars as a smart alternative to new ones. In this context, residual value—the estimated worth of a vehicle over time—has emerged as a critical factor shaping purchase decisions, financing, and ownership cost. 

Current Market Scenario

The Indian used car market is projected to reach 15 million units by 2030, positioning it to surpass new car sales. Historically, the market was fragmented and dominated by unauthorized dealers, making the pre-owned vehicle buying experience cumbersome and riddled with challenges such as trust issues, inconsistent pricing, and lack of transparency. Currently, nearly 80% of used car sales still occur through the unorganized sector, driven largely by independent dealers. The remaining 20% is captured by new-age tech firms like Spinny and Cars24, along with OEM-authorized used car dealerships such as Maruti Suzuki True Value, Hyundai H Promise, and Mahindra First Choice.

However, the market dynamics are rapidly shifting. By 2028–2029, OEM-backed platforms and tech-driven start-ups are expected to capture nearly 60% market share. This shift is driven by rising consumer demand for transparency, reliability, financing options, and warranty-backed vehicle purchases.

OEM-certified outlets have brought structure, standardization, and quality assurance to the pre-owned space. In parallel, tech platforms have transformed the customer experience by offering digital listings, vehicle inspections, financing, home test drives, and doorstep delivery. These innovations are building consumer trust and expanding market access—especially among younger, urban buyers seeking a seamless and dependable used car buying journey.

Voice of Customer Analysis: Ground-Level Insights

At MarketsandMarkets, we recently conducted a strategic Voice of Customer (VoC) study across four key Indian metros—Delhi NCR, Mumbai, Bengaluru, and Chennai—engaging with over 5,000 recent used car buyers. The objective was to decode the critical factors influencing residual value from a buyer’s lens and capture actionable insights on brand, model, transmission, fuel type, and usage patterns. This data-driven analysis offers a granular and strategic understanding of how consumer behavior, market dynamics, and technical attributes shape resale value, enabling stakeholders to align product, pricing, and positioning strategies in the evolving Indian used car landscape

Key Factors Driving Car Depreciation

Our Voice of Customer analysis uncovered strategic insights into buyer behavior around used car depreciation. Vehicle age emerged as the dominant factor influencing perceived resale value, followed by physical condition and verified service history—highlighting a strong buyer preference for tangible, usage-based indicators. While elements like brand reputation, transmission type, and fuel variant have traditionally been emphasized, they were deprioritized by most consumers, indicating a market shift toward more practical, condition-driven valuation metrics. These findings suggest that for stakeholders to enhance residual value perception, focusing on vehicle upkeep, transparency, and usage history is more impactful than relying solely on brand or technical specifications

Residual Value Trends Key Findings: 5-Year Depreciation Snapshot

Brand Positioning: Top 8

Our 5-year residual value analysis, based on a baseline of 1-year-old vehicles with 20,000 km, revealed the following key findings for mass-market brands in India:

• Hyundai leads the pack with a 75% retention rate after one year.
• Honda, Maruti Suzuki, and KIA follow at 73%.
• Toyota stands at 72%.
• KIA has overtaken Toyota, reflecting a shift toward bold design and tech-driven features.
• Mahindra and Tata Motors ranked 7th and 8th, respectively, behind both Korean and Japanese OEMs.
• German brands like Volkswagen and Skoda have fallen far behind in the residual value race, underperforming in comparison to both Indian and Asian competitors.
• No Indian brand featured in the top five, highlighting the need to improve long-term reliability, perceived quality, and brand equity.

These insights underscore shifting consumer preferences and critical gaps in brand performance within India’s used car market.

Fuel and Transmission Type

Our analysis of fuel type and transmission impact on residual value revealed:

• Petrol vehicles retain 72% of their original value, slightly ahead of diesel at 71%, indicating fuel type is no longer a key differentiator in resale decisions.
• Manual transmissions lead with a 72% residual value, outperforming automatics at 70%, despite the latter’s rise in new car sales.
• The preference for manuals in the used market is driven by lower cost, easier maintenance, and better fuel efficiency, especially in Tier 2 and Tier 3 cities where value-for-money remains a top priority.

These trends highlight a practical, cost-conscious approach among Indian used car buyers

Residual Value of Electric Cars

Electric vehicles (EVs) in India currently show significantly weaker residual value performance compared to ICE vehicles:

• EVs lose ~40% of their original value within the 1st year, which is 10–15% higher depreciation than ICE vehicles.
• By Year 3, depreciation reaches ~60%, driven by range anxiety and battery aging concerns.
• In Year 4, resale value drops further due to tech obsolescence and a limited second-hand EV buyer base.
• By Year 5, EVs lose ~70% of their original value.

Key factors behind this steep decline include poor charging infrastructure, unclear warranty terms, and after-sales service gaps, all contributing to weak buyer confidence in the pre-owned EV segment.

Key Analysis and Future Predictions

• Hatchbacks and small cars are becoming outdated—their residual value is expected to crash to 60% within the first year, reflecting their declining relevance in both new and used markets.
• Legacy brands like Maruti Suzuki, Toyota, and Honda are at risk of irrelevance unless they urgently rethink their outdated designs and catch up on tech integration.
• KIA, MG, Mahindra, and TATA are rewriting the rules—they’re no longer the challengers but the trendsetters, thanks to feature-rich, bold designs and safety-first engineering.
• EVs are overhyped—for now. Despite the buzz, their resale performance is dismal and consumer trust remains shaky.
• Hybrids will steal the spotlight. While everyone’s distracted by EV noise, hybrids are silently positioning themselves as the smarter, more practical choice for Indian buyers.

Conclusion

India’s used car market is undergoing a power shift—where bold design, safety, and tech now trump legacy and mileage. Traditional giants like Maruti, Honda, and Toyota are on the verge of losing relevance if they don’t evolve fast. EVs may grab headlines, but hybrids and smart ICE vehicles are quietly winning the trust of real buyers.

E. Ramnath is a Team Lead – Automotive Advisory Services at MarketsandMarkets.
He specialises in Connected Cars, Telematics, Software-Defined Vehicles (SDVs), and Electric Vehicles. He has had stints at leading OEMs like Jaguar Land Rover and Great Wall Motors.