How Proposed MV Act Amendments Seek To Regulate Online Used Vehicle Marketplaces

In a bid to regulate the sale and purchase of used vehicles, the Ministry of Roads, Transport and Highways (MoRTH) has released a draft notification to bring further transparency in the highly-competitive space. 

The draft guidelines will be applicable to both online and offline marketplaces across the country and will be open to suggestions from all stakeholders for the next 30 days.

“The pre-owned car market in India has been gradually gaining ground. In recent years, the advent of online marketplaces, which are involved in buying and selling of pre-owned vehicles, has further given a boost to this market”, said MoRTH in a statement. 

According to the Ministry, the draft notification has been envisaged to promote ease of doing business and to address bottlenecks facing the industry. 

“In the current ecosystem, many issues were being faced viz. during transfer of vehicle to subsequent transferee, disputes in regard to third party damage liabilities, difficulty in determination of defaulter etc,” added the Ministry. 

Reacting to the development, CEO of CarTrade Tech’s consumer business Banwari Lal Sharma told Inc42, “With MoRTH issuing the draft notification, it will lay down a structure for the used car industry and also smoothen the overall process that will turn out to be fruitful for the resellers and buyers. Furthermore, the move will empower the stakeholders and safeguard the interests of the buyers, adding impetus to the used car segment in India.”

The Fine Print

The notification which was issued on September 12 plans to introduce authorisation certificates that will be mandatory for dealers involved in the sale of used vehicles. 

The draft rules also outline the procedure for the intimation of exchange between the registered vehicle owner and the dealer. Under the proposed rules, the owner has to digitally intimate authorities about the delivery of the vehicle to the authorised dealer. 

The move has likely been instituted to curb growing instances of fraud involving the resale of vehicles online and offline and to provide a regulatory framework to ensure due process. 

Additionally, the proposed rules also specify the powers and responsibilities of dealers in possession of the vehicles. The draft guidelines put the onus of ownership during the sale period on the authorised dealer and will be liable for all incidents related to the concerned vehicle.

Once the exchange takes place, the dealer will be responsible for all related documents including renewal of the registration certificate and regarding the transfer of ownership of the vehicle back to the owner or to the prospective owner. 

All dealers involved in the sale of used vehicles will have to maintain a digital inventory of all vehicles under their ownership. 

“Taking the liability off the owner once they have sold their car is a step in the right direction. Making the dealer accountable will help with the expedited transfer to buyer’s name, which is currently not taken seriously,” added CarTrade’s Sharma.

In a new measure, the draft notification also mandates the maintenance of a digital vehicle trip register for all vehicles whose ownership has been transferred to the dealer. 

Under the said norms, a dealer would have to furnish necessary details such as registration details, licence number, trip purpose and other information on the VAHAN portal whenever the vehicle is to be taken out for the purpose of test drive, service, among a handful of other conditions. 

The Resale Market Conundrum

The overall used vehicle market is largely unorganised with deals largely taking place between individuals. While that continues to be the norm, the space saw a major thrust with the entry of organised online used vehicle platforms such as Cars24, CarTrade, Droom and others.

Traditionally, Maruti Suzuki led the organised space with its offering such as True Value which offered users the choice to buy refurbished cars at competitive rates. Realising the potential of the industry, even automaker Mahindra also ventured into the space with its Mahindra First Choice offering and since then a host of companies have tried to crack the space. 

Initially, what worked for these online portals was better choices available on the portals and the option of allowing a common person to list their car, albeit the process itself was fraught with its own set of challenges.

The pandemic-era boom was quickly followed by a rising number of frauds and scams that targeted novices with too-good-to-be-true offers. 

Earlier this year, a Panchkula resident allegedly lost INR 7.5 Lakh on a used car marketplace while looking to buy a second-hand car. In February, a trio was arrested from Kerala in a major scam for selling the same car to multiple people via online used car marketplaces.

According to a report, the Indian used car market was valued at $32.14 bn at the end of 2021. This number was projected to soar to $74.70 Bn by 2027, growing at a CAGR of 15.1%.