Ride-sharing companies helped car sales in India in 2016
Last year, ride-sharing companies including Uber and Ola purchased 100,000 vehicles in India, a 43% increase on the previous year, according to a report from The Economic Times. Fleet sales accounted for half a million passenger vehicles over the last two years, or 10% of the total. Although car makers expect single-digit growth in passenger vehicle sales in 2017, the report projects ride-sharing companies will buy 25% more vehicles than they did last year.
NEW DELHI | MUMBAI: App-based cab aggregators such as Uber and Ola have not only disrupted traditional taxi and three-wheeler markets across Indian cities, but they are also pushing overall car sales at a time when automakers are struggling to expand business.Fleet operators are estimated to have added more than half a million vehicles over the last two years, accounting for more than 10 per cent of total passenger vehicle sales during this period, largely helped by soaring sales to cab aggregators.Carmakers expect cab aggregators to drive their sales in the future even as fewer people may buy vehicles for personal use. “Bulk of cars will not be privately owned but will be used commercially by aggregators,” said RC Bhargava, chairman of the country’s largest carmaker Maruti Suzuki India According to carmakers that ET spoke with, app-based cab operators accounted for over 100,000 cars, or almost one-third of total sales to fleet operators last year, up from around 70,000, or about one-fourth of total taxi sales in 2015. This year, sales to cab aggregators are expected to increase by at least 25 per cent while overall passenger vehicle sales are expected to grow in single digits, they said.“App-based aggregators have added over 600,000 vehicles in the last four-five years,” said Puneet Gupta, associate director at automotive consulting firm IHS Markit. “At present, more than 75 per cent of business for these firms comes from the top seven metros. As they increase their reach, demand for vehicles will also go up. In the short-to- mid term, almost 30 per cent of growth registered in the passenger vehicle segment will come in from these players.”Maruti Suzuki’s Bhargava, however, doesn’t see this as a threat to the industry. “Given that the running cycles of cabs are more than personal vehicles, we foresee shorter replacement cycles for the cars. This will trigger demand for cars,” he told ET.Whether the popularity of Uber and Ola impacts car sales for personal use in the future or not, right now soaring demand from aggregators is a boon for an industry that has been otherwise struggling to grow sales due to a number of reasons, including an eight-month ban on sales of larger diesel vehicles in the National Capital Region, imposition of infrastructure cess of up to 4 per cent in the union budget last year, and most recently on account of weak consumer sentiment post the November 8 demonetisation announcement.“Growth was stunted by diesel ban and demonetisation, which impacted the sentiment in 2016 and given the tough times, the fleet segment turned out to be a significant contributor,” said Rakesh Srivastava, senior vice-president, sales and marketing, Hyundai Motor India.Calling app-based cab aggregators “the new shooting star for the Indian passenger vehicle makers”, Srivastava said they will continue to drive demand and compel carmakers to make products designed for them. Fleet segment is expected to contribute to about 15 per cent of the passenger vehicle market, up from the current 5-6 per cent. Approximately 600,000 cars are now operating in the app-based cab segment, according to industry estimates. With both Ola and Uber planning to penetrate more cities and towns across the country, the segment is set for exponential growth.Ola has already announced its ambition of having a fleet of 5 million while Uber plans to lease 200,000 cars to drivers joining its platform over the next two years.Most carmakers have set up dedicated teams to support fleet services with special pricing, service plans and customisation to meet the specific requirements of such companies. Mahindra and Mahindra has put in place a dedicated team to handle fleet and new-age business under its institutional sales arm. It offers product , finance, insurance, exchange and service under the One Mahindra umbrella. Veejay Ram Nakra, senior vice-president for sales and customer service at its automotive division, said the fleet segment accounts for a significant share of its passenger car sales and the company is looking to increase penetration in this segment in the near future.Mahindra has already tied up with Ola to deliver more than 40,000 cars in two years. Its rival Tata Motors has tied up with Uber to deliver 20,000 cars. Maruti Suzuki has inked partnerships with Uber and Ola to train 30,000 and 40,000 driver partners, respectively, at its training schools over the next three years.India’s biggest carmaker sold over 60,000 cars to cab aggregators between April and December 2016, 67 per cent higher than a year earlier. In FY16, the firm’s total sales to aggregators stood at 48,000 units. Sales to cab aggregators currently constitute about 6 per cent of its retail sales.At Toyota Kirloskar Motor, sales to cab aggregators more than doubled to 12,700 in 2016 from 4,500 units in the previous year. Sales to cab aggregators now account for 10 per cent of overall volume, up from 3 per cent in 2015.N Raja, senior vice-president at the firm, expects the segment to grow faster although Toyota Kirloskar did experience some initial stress on fleet sales in November after demonetisation. Arun Malhotra, managing director at Nissan Motor India, said the fleet segment has “significant potential in the coming years”.