West Asia crisis-induced fuel price surge may dent demand for used ICE vehicles

Escalating tensions in West Asia and the resulting spike in crude oil prices could reshape buying behaviour in India's used-car market, as consumers become increasingly sensitive to vehicle running costs and overall cost of ownership.

The development assumes significance given the scale of the sector and the growing presence of organised players such as Mahindra First Choice, Spinny, Cars24, CarTrade, Droom and OLX Autos. According to Crisil Ratings, used-car sales reached 5.6 million units in FY25, ahead of 4.1 million units of new passenger vehicle sales. Industry estimates suggest the domestic pre-owned car market crossed the 6 million-unit mark in FY26, making it the country's largest automotive retail segment by volume.

While industry players say it is too early to see a direct impact from the recent increase in fuel prices, consumer behaviour could change if crude prices remain elevated.

"It is still early to see a major shift directly linked to the recent fuel price increase. However, if prices remain elevated, we expect fuel costs to become a bigger factor in the purchase journey," says Shivanshu Makkar, Builder, Cars24.

For many buyers, particularly first-time car owners and daily commuters, the question is increasingly shifting from "What can I afford to buy?" to "What can I afford to run?" he adds.

Fuel economy in focus

Cars24 believes prolonged fuel price increases could push more buyers towards fuel-efficient vehicles, CNG models and, over time, hybrids and electric vehicles. However, petrol vehicles continue to dominate demand in the used-car market.

Spinny is witnessing a similar trend. "Consumers are spending more time evaluating fuel efficiency, maintenance expenses and long-term operating costs rather than focusing solely on purchase price," says Hanish Yadav, Senior Vice President, Spinny.

"We have seen a slight shift in awareness among consumers towards the long-term economics of vehicle ownership. In that context, the value proposition of pre-owned cars becomes even stronger, as buyers can access higher-specification vehicles at significantly lower costs compared to buying new," he says.

At the same time, fuel-price increases have not yet triggered a significant migration towards alternative powertrains.

"While there is heightened interest in fuel efficiency, we have not seen a material shift towards CNG, hybrid or EV models solely because of recent fuel price movements," Yadav adds.

Instead, buyers are largely optimising within conventional petrol and diesel segments by preferring vehicles that offer better mileage, lower running costs and proven reliability.

Vehicle preferences may evolve

The impact on resale values and inventory movement remains limited for now, according to industry players. However, vehicles with lower running costs could eventually command stronger demand and better value retention if fuel prices remain elevated.

Cars24 data shows the share of SUVs in used-car demand has risen from 15% in 2023 to 32% in 2025, underscoring the segment's continued popularity.

Spinny says reliable hatchbacks, compact SUVs and efficient sedans continue to witness stronger demand and faster inventory movement, with purchase decisions increasingly being shaped by total ownership costs rather than fuel type alone.

The shift may already be visible in the broader passenger vehicle market.

"Rising fuel prices are visibly reshaping how India buys cars. After May's fuel-price revision, our members reported a marked rise in sale of fuel-efficient and alternative-fuel vehicles, and the numbers bear it out. CNG now makes up over 23% of PV retails and EVs nearly 7%, with alternative fuels together crossing 38% for the first time," says Saharsh Damani, CEO, Federation of Automobile Dealers Associations (FADA).

"For a growing set of buyers, the running-cost arithmetic increasingly tilts toward a new CNG or electric vehicle rather than holding on to, or buying, an older and less fuel-efficient one. Fuel economics has moved to the very centre of the purchase decision and is accelerating India's shift to cleaner, more affordable mobility," he adds.