What Is The Current Potential Of Philippines Pre-Owned Car Market?
Philippines used car market is currently at its growth stage with a growing appetite for certified and non-certified passenger cars. The used car market in terms of volume sales has increased to ~units in 2018 from ~ units in 2014 registering a CAGR of ~% over the review period 2014-2018. The market is largely fragmented with the presence of multi-brand dealers and large a number of individual sellers. Within the organized market, Direct Dealership Sales Agents (DDSA) and repossessed car sellers have a fairly concentrated market with only a few players supplying used cars in the market. The pre-owned vehicle buyers in Philippines have shown a higher interest in certified cars over non-certified cars due to better quality of refurbishment and replacement services of faulty parts with original parts, better after-sales services, and complete car inspection to compute the road worthiness, extended warranty & other documentation and finance services.
The used car market of Philippines by the value of the transaction has increased from PHP ~ billion in 2014 to PHP ~ billion in 2018. There are various reasons for the surge in market size by value of the transaction and one of the most significant reasons is the surging average ticket size of used cars in Philippines. The market share of the organized market has surged from ~% in 2014 to ~% in 2018. It has been observed that more and more OEM dealers are integrating certification infrastructure to attract more used car buyers. It has also been observed that in the last 5 years, the value of non-performing auto loans has surged significantly resulting in more foreclosures and auctions of repossessed cars by banks. The online channel has served as a platform for both organized and unorganized pre-owned car players to connect and conclude sales.
Industry Value Chain in Philippines Used Car Market
The Philippines used car market comprises of organized and unorganized market players. The unorganized market comprises of individual sellers and freelancers who supply the major volumes of used cars to the market. The new cars purchased by individuals in the Philippines generally convert into used cars within a span of 3-5 years. Later, these units are either sold to friends and family via word of mouth or are sold to multi-brand dealers via listing on online classifieds. If the vehicle is in good condition, the seller can sell the unit to DDSA also. Within the organized market, multi-brand dealers of used cars supply the highest volume of used cars in the market. The multi-brand dealers procure the used cars from either individual sellers, DDSA and from bank auctions of repossessed cars. In the case of DDSA, the cars are mostly procured via trade-ins, i.e., when the seller wishes to upgrade the vehicle to a new model of the same brand through an exchange program. The share of DDSA is expected to surge to ~% by 2023. The banks procure repossessed cars from vehicle buyers, who default on their auto loan. In this case, the bank confiscates the used cars and auctions it to the general public through tenders/auctions. Banks auction vehicles to players in both organized and unorganized market. Online platforms have provided the used car market players a convenient way to list vehicles and increase their reach to the target audience. Classified pages, online auto portals and social media handles such as Facebook have become the foundation of the online used car market in the Philippines.
Major Segmentations in Philippines Used Car Market
By Type of Market: The market is segmented in terms of organized market and unorganized market. In the Philippines, the organized market has a low market share compared to the unorganized market. The organized market consists of repossessed car dealers; DDSA’s and multi-brand used car dealers. On the other hand, the unorganized market consists of freelancers and individuals used car buyers and sellers.
By Average Replacement Period: The average replacement period segmentation deciphers the average time the vehicle the owner uses its asset and then sells it in the open market. It has been observed that on average, the vehicle owner retains the fleet for at least 3-5 years.
Major Segmentations In Philippines Used Car Market
By Type of Sales Channel: Within the organized market, the sales channel is either a direct dealership walk-in or a lead generated by the online portals for the organized players to increase the sale probability. In the case of the online channel, the eventual sale of the unit takes place from a physical location only.
The unorganized market players also take advantage of listing their fleet of the vehicle on classified portals and social media to increase the outreach. The other channel is direct dealer sellout, wherein the individual seller disposes of the used car for a fair market price to either the multi-brand dealer or DDSA. Unorganized players also depend on word of mouth as a sales channel, wherein the individual consumer sells the vehicle to a known individual within friends or family.
Competitive Landscape in Philippines Used Car Market
Competition within the Philippines used the car market was witnessed to be fragmented in nature with the unorganized market capturing the majority of the market share. Most of the used car sellers in the Philippines belong to the unorganized market constituting of free-lancers and individual sellers. The unorganized players in the market are highly dependent on the online channel and are relatively lesser dependent on word of mouth channels. The unorganized market in the Philippines has a ~% market share in terms of sales volume in 2018. In terms of the vehicle brand type, the market is concentrated with 5 major brands accounting for ~% of the market share in the Philippines used car market. The major five brands are Toyota, Honda, Nissan, Hyundai, and Mitsubishi. Within the organized market, the competition within volumes supplied by the DDSA is fairly concentrated with the presence of 30-40 players. The Direct Dealership Sales Agents (DDSA) market segment has 5 major players holding ~% of the market share and are supplying both certified and non-certified used cars in the market. In the Philippines, the auto loan default rate is on surge due to higher inflation. This has resulted in banks auctioning the forfeited units to multi-brand dealers and others. The market is moderately fragmented with no bank having a share of more than ~% in terms of volume of repossessed cars auctioned in the market in 2018.
Key Segments Covered:-
Philippines Used Car Market Overview and Size
By Type of Market Structure
By Type of Sales Origin (Organised Market)
Direct Dealership Sales Agent
Repossessed Units Sold By Banks
Multi Brand Dealers
By Type of Sales Channel (Organised Market)
By Average Ticket Size of Used Vehicle
By Average Vehicle Replacement Period
By Type of Vehicle Manufacturer/Brand
Other European Brands
Key Target Audience:-
Potential Direct Dealership Sales Agents
Existing Multi Brand Dealerships
Banks & Subsidiaries
Captive Finance Companies
Non-Banking Financial Institutions
Cab Aggregators and Car Rental Companies
Online Auto Portals
Investors and VC Firms
Time Period Captured in the Report:-
Financial Year 2014-2018: Historical Period
Financial Year 2019-2023: Future Forecast
Companies Cited in the Report:-
Nissan Intelligent Choice
East West Bank
Classified Pages/ Online Auto Portal
Key Topics Covered in the Report:-
Used car Sales Market Philippines
Philippines Used Car Market
Used Car Market in Philippines
Repossessed Cars for Sale Philippines
2nd hand Cars for Sale Philippines
Pre-owned car sales Philippines
Philippines Used Car Industry
Used Car Industry Philippines
Used Car Industry in Philippines
Used Car Services Market in Philippines
Market of Philippines Used Car
Pre-owned vehicle buyers in Philippines
Used car market of the Philippines
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Ankur Gupta, Head Marketing & Communications