Mahindra's First Choice begins revamp in used car auctions

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The way banks and non-bank finance companies (NBFCs) auction thousands of repossessed and off-lease cars every month is changing. 

From a complex, time and resource consuming process, these auctions are getting streamlined, with the entry of players with an automotive experience.

M&M’s used car division, First Choice, has become the first private company to partner with a bank for conducting such an auction, through its recent True Time Bids initiative. Taking the traditional auction process a step further, those by First Choice also allow bids online. This is a live online-offline auction platform, allowing buyers to participate in traditional ‘on the ground’ used car auctions via the internet in real-time. First Choice conducted the first such auction in July and sold 28 vehicles owned by Kotak Mahindra Bank. 

“To maximise the realisation from such auction, banks want more and more buyers to participate. Since these auctions have been traditionally conducted at one specific city and location for one-two days, many interested buyers are unable to participate,” said Nagendra Palle, chief executive officer at First Choice. 

Some banks also conduct an online auction but the offline-online exercise does not happen simultaneously. This often leads to multiple auctions and brings inefficiency. 

Online participation leads to much higher participation. When the first auction was held for Kotak Mahindra, only 21 bidders were physically present at the venue but about 200 participated online. 

Interestingly, 90% of the vehicles were won by the online buyers. All these were mostly used car dealers.  

Banks only indicate their expected price for a vehicle and if the auction bid is higher, the vehicle gets sold. The average price of these vehicles ranges from Rs 2.5 to 3 lakh each. Palle said about 15,000 such cars get auctioned by banks and NBFCs every month. 

“In case the bid price is lower than expected by a bank, they may look at revising it or hold the vehicle for some time,” he said.

In the past month, First Choice has organised two such auctions for TVS Credit Services. It also plans to conduct such an auction with Reliance Capital. Both these are NBFCs. 

First Choice plans to organise three more auctions in the coming months and take it eventually to around 10 events a month.