Market Trends of Sri Lanka Used Car Industry
Rising Adoption of Digital Technologies Will Foster the Growth of the Target Market
- The adoption of advanced technology by tech-savvy young individuals, the emergence of e-commerce marketplaces, and various companies' aggressive strategies to spend on online advertisements are boosting the demand for used cars sold through online platforms. These platforms assist consumers in making informed decisions as end-end information on vehicles is already listed, such as vehicle make, model, kilometers driven, engine capacity, condition, etc.
- Moreover, increasing internet penetration rates and an increasing urbanization rate across Sri Lanka contribute to developing an efficient ecosystem wherein vehicle owners can reach out to buyers from different parts of a region and initiate a smooth online sales process without any need to visit a physical location.
- The Internet penetration rate in Sri Lanka stood at 67% in 2022, a substantial increase from 2018, wherein the internet penetration rate stood at only 47%. Although the urban population in Sri Lanka is one of the lowest in the South Asian region, which has stagnated in recent years, with the gradual revival of the economy, the urban population in Sri Lanka is expected to grow.
- As of 2022, the urban population merely contributed to a share of 19% of the overall population, witnessing an increase from 2018, wherein the urban population in Sri Lanka stood at 18%. These consumers are highly tech-savvy, and most of them have the financial capability to make an informed decision to purchase a vehicle for their mobility. Owing to these factors, the online used car market in Sri Lanka is expected to showcase positive growth in the coming years.
- To gain a competitive advantage in the lucrative online used car market, various players from neighboring countries are actively engaging in integrating into the cross-border sales opportunity with a high focus on marketing, as Sri Lanka is highly dependent on vehicle importation. With the increasing internet penetration and usage of online classified platforms for making purchasing decisions, consumers can buy second-hand cars from their neighboring countries, which helps them get a better price for used car models.
- Further, Sri Lankan companies also have an opportunity to form effective partnerships with online used car platforms from neighboring countries such as India to gain access to the cross-border market, which will help its citizens purchase second-hand cars at competitive prices.
- Further, improved offerings such as an enormous number of photos and videos of the used vehicles being sold through online platforms and easy online instant finance, insurance, and warranty service are expected to fuel the demand for used cars in Sri Lanka in the coming years.
Understand The Key Trends Shaping This Market
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Hatchbacks to Remain the Preferred Used Vehicle Type in Sri Lanka
- Based on vehicle type, hatchbacks remained the preferred choice of consumers willing to purchase used cars in the Sri Lankan market, attributed to the lower prices compared to their counterparts. Ikman, a leading online used car platform in Sri Lanka, estimated that listings of hatchback-type models contributed to a majority share of 35% of the overall listings on their website in November 2022.
- Saloon and SUV car types made up 32% and 17% of the total car ads, respectively, followed by station wagons (4%) and Multi-Purpose Vehicles (MPV, 1%) during the same period. The rest of the car types amounted to 11% of the car listings on the Ikman car marketplace. Hatchback models from Toyota, Suzuki, Nissan, Honda, Mitsubishi, and Micro were the most popular vehicle types in Sri Lanka. In November 2022, Ikman noted that around 28% of the car listings on their platform were of Toyota make, followed by Suzuki with a 17% share and Nissan with an 11% share.
- The majority of the vehicles in Sri Lanka operating as of August 2023 were of European or Japanese origin. The new as well as the used car market of the country is heavily dependent on the import market, limiting the growth prospect of the used car market in Sri Lanka. It is estimated that Sri Lanka had around 5.6 million vehicles in operation (cumulative registrations are higher at over eight million) as of June 2022.
- Further, the vehicle-person ratio stood at approximately 1:4, or precisely 26 vehicles per 100 people. Consumer sentiment in Sri Lanka is driven by necessity rather than luxury when it comes to the purchase of vehicles. Therefore, these customers prefer to avail of a lower-priced used hatchback model rather than expensive sports utility vehicle (SUV) models. Further, consumers in the country are also wary of high import taxes that is factored in while importing vehicles from other country.
- Moreover, diesel/petrol-operated hatchback cars will cease to remain the popular choice among consumers in the short term till the new EV market reaches its optimal growth stage. The electric vehicle (EV) market in Sri Lanka is currently in its nascent phase, with limited prospects even in the import market due to the lack of EV infrastructure in the country. As the EV market reaches its maturity phase in the country, there will exist a massive use of EV models in the coming years. The used EV market will further witness expansion as the government of Sri Lanka implements strict regulations on the sales of petrol/diesel-operated vehicles during the forecast period.
