In normal times, a BMW or a Jaguar is a prized possession. But in flood-ravaged Chennai, these marquee brands are getting abandoned, like they never have been in their glittering histories.
Reason? Proud owners of these luxury brands have little use for them after the damage caused by water logging. In contrast, smaller cars are still being repaired and brought back on the roads.
Car auctioneers are seeing more medium and high-end cars coming to them after the floods.For instance, Bajaj Allianz General Insurance received 5,000 motor claims after the floods. Of this, 35 per cent were mid-segment cars and five to six per cent constituted luxury cars.
About 35 per cent of the 5,000 cars were declared as write offs and given up for auction. Of this, nearly 85 per cent were medium and high-end cars. Copart, the US-based auto auctioneer, which has recently entered the Indian market, expects to auction 1,500 cars damaged in the Chennai floods.
Rajeev Kapoor, chief executive officer of Copart India, said they have largely received medium to high-end cars and not many small cars. “Considering the number of luxury cars that ply on the roads, those that have come to us for auction are much higher,” added Ravi Mehra, president, auctions, Cartrade.com. These include high-value models like Porsche, BMW, Jaguar and Audi. There are also a sizeable number of medium segment cars priced at Rs 15 lakh and above. Cartrade has auctioned 3,500 flooded cars and estimates the total number of salvaged cars to be around 20,000.
The repair cost of these high-end cars is big enough not to be viable for insurance companies. For example, if the insurance company has to pay for the repair of a car with a insured declared value (IDV) of Rs 1.2 crore, their costs can go up to Rs 80 lakh. Whereas if the insurance company pays the total IDV to the customer and declares it salvaged, there are chances of getting 50 per cent or more of the IDV from the auctions, which can be even Rs 60 lakh.
Cartrade has seen high-end cars auctioned up to 50 per cent of the IDV and Copart has seen even much higher price realisation. “In our virtual auction model, which is run on our VB3 platform, the price realisation is set by the buyers who are bidding. This of course depends on the model’s year, extend of damage and trim type. We have seen some good bids reaching up to about 70 per cent of IDV,” said Kapoor.
Points out Mehra: “ For insurance companies it is also a matter of settling the claim as fast as they can. All the repair workshops in the city have been full for the past few months and many are taking the cars to neighbouring cities. Most insurance companies have suffered heavy losses.”
In case of Bajaj Allianz General Insurance, the profit after tax in Q3 FY16 has come down to Rs 68 crore from Rs 143 crore in the same quarter last year. “This was mainly due to the unprecedented number of motor claims we saw from Chennai due to floods,” a company spokesperson confirmed.
Dealers, who buy to dismantle and take out undamaged parts, largely buy the auctioned cars. There are also those who have the wherewithal to repair and sell it off and there are consumers who attach an aspirational value to these vehicles. However, repairing and reusing flooded cars carries the risk of catching fire as most high-end cars have interconnected electrical systems and quick fix solutions, which can do more harm than good.
“These cars are bought by dealers coming from different cities. Most dealers who refurbish and resell the cars declare that they are salvaged in the deluge. However, the customer should get a trained eye to detect this while buying a refurbished car,” warned Mehra.
