Today's customers have many alternatives to choose from when it comes to their day-to-day commuting. Transportation Network Companies (TNC) like Ola and Uber have played a pivotal role in transforming everyday traveling, be it in terms of convenience, hassle-free and affordable travel. In addition to this, there are other options like Quick Ride, Bounce, Vogo, Zoom Car, Onn, Rapido, Wheelstreet, Drivezy, Snapbikes, Volercars, and many others, who are revolutionizing the transport aggregation landscape. This has altered the perception of people in owning a vehicle and has curbed the growth of the automobile industry to a large scale.
Most buyers are hesitant in owning a car when given options. Servicing and maintaining a car after purchasing burns a hole in the pockets of the buyers. Taxi aggregators Ola and Uber have pooling options that allow a rider to share the cab with another rider. It is not only cheap but also reduces traffic congestion.
But to put the blame of a slowing trend in car sales
solely on the cab aggregators will be wrong. In the US, while Uber & Lyft are the key players, but car sales in the last few years are robust. In India, 46 percent of car buyers are first time users. People may use public transport like Ola and Uber to go to offices on weekdays and the daily commute, but still, they buy a vehicle for the weekend outings with the family. There are reasons like liquidity crunch, exorbitant prices of cars due to regulatory issues, higher tax, and rise in insurance rates which have led to this crisis in the automobile sector.
Interestingly, MSI, the country's largest carmaker, saw its market share dip by over two percentage points in April to August period. While other auto players are grappling with the plunging in car sales. In this fiscal so far, passenger vehicle sales have declined by almost a quarter from a year ago. Sales have declined for 10 straight months, so far, and in 13 of the last 14 months.
The buying power of Indians has not risen in line with the increase in car prices. This resulted in many to postpone their plans for purchasing a car. The annual per capita income in India is around $2,200 (INR 1.56 lakhs) while in Europe, it is eighteen times higher at around $40,000. It is difficult for a country with such a low per capita income to have the capacity to pay for a car.
At the end of the day, it all comes down to regulating the policies around vehicle purchasing and good resale value for the vehicles. The government should try to reduce taxes on petrol and diesel passenger vehicles. That will lead to a reduction in the prices of cars and will encourage buyers to invest in a new vehicle. Also, automobile companies should offer better resale value for their products. Low resale value for the vehicles hinders the buyers. The companies should introduce attractive exchange offers when they launch a new product. On the other hand, this is also an opportunity for companies to introduce electric vehicles into the market that are economical and efficient, as the Govt. policies also support this initiative.