India's youth are driving a fundamental shift toward shared mobility services.
More than half of country's millennials are already questioning the need for purchasing and owning a car, according to Deloitte's 2019 Global Automotive Consumer Study that was released in June. The consultancy says the concept of shared mobility is gaining ground in a country where about 600 million people, more than half of its population, is under the age of 25.
The results of the study appear to bode ill for India’s auto sector, which has been witnessing its worst slide in sales of passenger vehicles in more than a decade. The number of cars sold have fallen in every month in 2019, in comparison to last year. The country’s largest car maker, Maruti Suzuki, which had nearly a 50% market share, sold 98,210 units in July. This was its worst performance in nearly 20 years with a 36% decline from the same month a year earlier.
Overall, vehicle manufacturers reported their worst August sales in 18 years, and the passenger vehicle segment declined by nearly 31% in July from a year earlier, to 200,790 units, the steepest fall in sales numbers since the year 2000.
Car companies are struggling to deal with falling share prices, dealership closures, factory shutdowns, high GST tax rate and further price hikes as new engines are introduced based on Bharat Stage Six (BS VI) emission norms.
“The cost of owning a vehicle has increased due to implementation of insurance law and new vehicle safety norms," says Jaspal Singh, Director of Valoriser Consultants, a transportation sector consultancy. "Along with this, the liquidity crunch has created a shortage of financing options from banks and costly loans for potential buyers. Thereby, contributing to a low customer sentiment towards purchases of cars and spurring demand for shared mobility services."
A Morgan Stanley report forecasts that by the year 2030 India will witness an expansion of shared mobility services and is expected to emerge as a leader in shared mobility. The proportion of shared miles will reach 35% of all the miles travelled in the country, and this will further increase to 50% by 2040.
The expansion of well-known ride sharing services such as Ola and Uber has already contributed toward the declining demand for passenger vehicles that fell by one-third in the last two years. And comparatively smaller startups have emerged to ride on the momentum of these two companies, by innovating to fulfill any type of mobility demands, which are not being effectively handled by the two entrenched global players.
Nitin Chadha, cofounder of sRide says, "There exists a large market for mobility services that are below the price point of Uber and Ola, especially comprising of corporate employees."
As an intra-city carpooling startup, sRide has partnered with big companies like Capgemini, Infosys, Wipro and Tech Mahindra to effectively solve problems such as a lack of adequate parking spaces as well as operational challenges in managing the vehicle movement during peak office hours in the morning and evening. "And due to the benefits that we provide to our users, in this niche target segment, we have grown more than 10 times in revenue in the last 12 months" Nitin added, a feat that attracted Ola to show interest over a 26% stake in the startup.
In car sharing segment, Drivezy and Zoomcar are catering to young customers who possess a fondness for the renting economy and lead an asset-lite lifestyle. These startups offer a self-drive vehicle, a freedom of choice to experience a higher segment model and at the same time to avoid maintenance costs associated with a depreciating asset. While they focus on both intra-city and outstation hiring of vehicles, Zoomcar as a self-driving car market leader has been promoting the idea of a monthly car subscription service.
“The new option of subscribing a car is becoming a preferred choice as compared to conventional car buying habits. There is a visible shift in consumer habits here. This is further motivating car makers in the domestic market to turn towards investing in shared mobility space,” says Greg Moran, cofounder and CEO of Zoomcar.
In India this year, the second-largest player, Hyundai Motor Corp, has invested $300 million in Ola and started offering a subscription service through the self-drive company Revv. Whereas third ranked Mahindra and Mahindra is launching an electric ride sharing service called Glyd, and has invested between $300 and $400 million into Zoomcar, following the same sort of strategic tie-ups taking place in the global arena, where the biggest car markets of Europe, the U.S., China are also being disrupted.
“The associations with automakers have created a strong backbone of capital and fleets, which has enabled a widening of the industry's footprint across the country” Greg Moran further added. While following a two pronged strategy, auto makers are giving startups time to grow in a budding yet under penetrated shared mobility market. The recent collaborations will only bear fruit in long run because for the immediate short term respite from slide in sales, auto companies are still depending on government’s stimulus plan to spur customer demand during the crucial festive period from October to December; a move that will prove to be crucial in protecting their foreign direct investments and safeguarding India’s status as the fourth biggest car market in the world.
