Auto Sector Slowdown: It's Not About Ola, Uber Rides, Reasons Lie Elsewhere

Passenger cars form only a part of the total auto market. Had the millennials en masse decided to shift to taxis for their movement needs, the two-wheeler sales would not have slumped. Nor would have truck sales or other commercial vehicles come down. According to the data released by the Society of Indian Automobile Manufacturers, all segments of the Indian auto market remained in the red in August.

Passenger cars were down by 41 per cent to 115, 957 units, two-wheelers dipped by 22.29 per cent to 1.51 million and commercial vehicles saw a decline by 38.71 per cent to 51,897 units in August compared to the same month the year before.

In the April-to-August period in the current financial year, passenger vehicles, commercial vehicles and two-wheelers saw a decline as compared to the same period in the last financial year. Passenger vehicles, utility vehicles and vans saw a decline of 23.54 per cent at 1.10 million while commercial vehicles went down by 19 per cent and two-wheelers and three-wheelers fell by 14.85 per cent and 7.32 per cent, respectively.

Although Ola and Uber have done wonders for commuters, with over 40 per cent of smartphones in India downloading the Uber app and 25 per cent the Ola app, the decision on buying a car is rarely decided on availability of adequate taxi rides. Interestingly, the growth rate of rides for both Ola and Uber fell in 2018 to 20 per cent from 57 per cent the year before.

According to a study over a decade by Booz Allen consultancy in the US, published in 2004, car buying depends on two factors, “product excellence” and “cost of ownership.” Others pointed out the emotional aspects. A Gallup poll in the US found out that perception of the durability of the vehicle and ownership experience makes a difference. Closer home, in India, experts have pointed out the ability to pay for a vehicle over a reasonable period of time is also an important factor in buying decisions.

It would be wrong to look at the taxi services to identify the slump. The reasons are elsewhere, related to the overall slump of the economy which showed low GDP growth of 5 per cent in August this year as compared to 8 per cent growth in the same month last year. After all, there was a slump in auto sales, including passenger vehicle sales, in 2011-12 when Ola and Uber were not around.