Taxis to overtake private car sales soon: Maruti Suzuki’s RC Bhargava

Maruti Suzuki chairman RC Bhargava sees fewer cars being bought for personal use amid the rise of online taxi services such as Ola and Uber


Maruti Suzuki chairman RC Bhargava. Maruti Suzuki fleet sales surged 60% during 2015-16, largely on account of demand from online taxi services such as Ola and Uber. Photo: Ramesh Pathania/Mint
Maruti Suzuki chairman RC Bhargava. Maruti Suzuki fleet sales surged 60% during 2015-16, largely on account of demand from online taxi services such as Ola and Uber. Photo: Ramesh Pathania/Mint

New Delhi: In a move that is indicative of Indian auto companies’ belated and grudging acceptance that their industry has been disrupted, perhaps forever, by new models of ownership, the country’s largest car maker, Maruti Suzuki India Ltd, expects the bulk of future vehicle purchases to be in the taxi space.

Fewer cars will be bought for personal use as shared mobility spreads its wings, according to Maruti Suzuki.

“The ownership spectrum will change. Bulk of the cars will not be privately owned. A lot of cars will be owned (commercially used) by the aggregators,” Maruti Suzuki chairman R.C. Bhargava said at a press conference on Friday.

At Maruti itself, fleet sales, albeit on a smaller base, surged 60% during 2015-16, largely on account of demand from taxi aggregators.

The changing car-buying pattern, however, is unlikely to impact sales, Bhargava said.

“I do not see these aggregators as a threat to the industry. They are positive for the industry. The reason being, anything that increases efficiency level, which is a more economic solution, has to be good for the customer, good for the user of the car, good for the industry. There cannot be a situation which is good for a user and a customer but bad for the industry. So, I don’t agree with the Mahindra assessment,” Bhargava said.

He was referring to a September 2015 statement by Mahindra Group chairman Anand Mahindra, who said that since cab-hailing companies such as Ola and Uber had turned transportation into a commodity, auto sales could be impacted.

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Mahindra’s assessment may have been based on the fact that if Ola, promoted by ANI Technologies Pvt. Ltd, had built a fleet of 350,000 cars across India and Uber around 150,000, and assuming their claim that none of their vehicles is older than three years is correct, then together they would have accounted for 9.25% of the 5.4 million passenger cars sold in India between 2013-14 and 2015-16. And, since one cab gets utilized multiple times during the day, it is a potential cause of concern.

“A lot of youngsters who can own vehicles today don’t want to own one, but only need access to transportation,” Mahindra had said.

Bhargava’s argument, on the other hand, is based on the assumption that with the increasing use of four-wheelers due to the taxi aggregators’ aggressive push, customers will move away from scooters and motorcycles to the vehicles of the cab-hailing companies.

The jury is still out on the disruption caused by the taxi aggregators, but industry experts see it as a sign of things to come.

A June 2015 Morgan Stanley report said private car ownership is more aspirational in India, a country with growing Internet access and a large population of young people who are concerned about pollution and are open to ride-sharing.

“India has all the right ingredients to become one of the largest markets for shared mobility in the world,” Morgan Stanley analyst Binay Singh wrote in the report.

According to John Moavenzadeh, head of Mobility Industries and member of the executive committee of the World Economic Forum, in India, Ola and Uber in the short term are actually generating sales for auto manufacturers because they are providing financing programmes for people to purchase their vehicles and to become drivers.

“That’s great for the vehicle manufacturers, but that is a short-term gain coming at the cost of medium- and long-term sales opportunities following that classic old model of ‘we need to sell more cars’,” Moavenzadeh said in an October interview.

“But, you are not going to sell more cars if you have a fleet of cars which are much more heavily utilized and, of course, that’s what Ola and Uber do. You take a car, it is used 50% of the time, whereas (in the) personal mobility model, a car is sitting idle for 95% of the time,” Moavenzadeh said. “In the long term, they will take cars off the road. That’s the big challenge.”

Not that Indian manufacturers are sitting idle. They are testing the waters.

While Maruti has tied up with Ola and Uber for driver training programmes, Mahindra has tied up with Ola to finance vehicles for more than 40,000 of its drivers by 2018. The deal is pegged at Rs2,600 crore. Tata Motors Ltd has a similar tie-up with Uber.

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