Covid-19 impact: Indian consumers may move away from ride-hailing services

NEW DELHI/MUMBAI: The covid-19 pandemic might significantly alter mobility related preferences of Indians, with auto industry executives expecting some consumers to move towards buying their own vehicles rather than availing ride-haling services due to hygiene and health related concerns.

In the long run, therefore, purchases of affordable hatchbacks and compact sport utility vehicles may see a boost. Some may also go for affordable motorcycles as well.

Ride-hailing services such as Ola Cabs and Uber were the first to stop their services in some cities as the viral outbreak made its across the country. The two have now entirely shut down their operations.

“Individual car buying might go up (after the pandemic) as some customers may not be comfortable using shared cabs and public transport since people will be concerned about hygiene issues,” said Rajeev Chaba, managing director, MG Motor India Pvt Ltd.

Owned by China’s SAIC Motor Corp, MG Motor is among the new entrants in India's automobile market and have tasted reasonable success with its mid-size sport utility vehicle Hector.

“The consumers who were using Ola or Uber, will think about buying a vehicle for themselves. The virus cannot be killed, its impact can only be mitigated. It will take at least two years for a vaccine to come up,” he added.

According to a study conducted in China, by Ipsos, a global market and opinion research firm, 66% of respondents are now thinking of buying a car as opposed just 34% before the outbreak. Also just 15% of the respondents now plan to opt for cab services compared with 21% before.

Also, 77% of respondents said their intention to purchasing a vehicle stem from the fact it can reduce chances of infection. The study also found that most purchases will be done by buyers who currently don’t own a vehicle.

Although conditions and buyer behaviour in India may not be similar to those in China, given low income levels here, but some of change in consumer psyche is expected. Industry experts believe that those who availed cab services but had the ability to buy a car will now be inclined towards making a purchase.

According to Rakesh Srivastava, managing director, Nissan Motor India, in the aftermath of the pandemic, auto industry as a value-up industry will face the challenge of creating customer demand for its channel’s sustainability, while also addressing the challenges of multi-layered supply chain for a streamlined production.

“At the customer end, Indian consumers will impart high level of importance in the vehicles on hygiene and health safety in addition to vehicle safety, leading to changes in terms of usages of vehicles while hiring of vehicles, as they will desist from carpooling. They will prefer to buy their own vehicles and with India being a price sensitive market, hatchbacks and below 4-metre SUVs will be their preferred choice,” Srivastava.

The economic downturn in the aftermath of the outbreak may not help car makers recover the losses made but to some extend they stand to gain in the years to come if this trend turns out to be true.

The Indian middle class will definitely contemplate owning a vehicle, purely for safe commuting in such emergencies. This is not due to any positive strokes by the automakers, but totally due to the dismal levels of service shown by all public mobility solutions including the likes of Ola and Uber, says Avik Chattopadhyay, founder, brand consultancy firm, Expereal.

“But then, an emergency vehicle will be a small and frugal four-wheeler, with the lowest cost of ownership. Typically, the Marutis, Hyundais and Tatas of the world. And then, this is pure contemplation that will take a good 8-10 months of financial reconstruction to see any significant conversion,” added Chattopadhyay.

According to Rajeev Singh, partner at Deloitte India, the clear winner would be the company which identifies demand in the right customer segments and offers financing services in the post covid-19 scenario.

“Entry level and cars up to 10 lakh could see a spike in demand as people are expected to follow hygiene more than ever. Secondly, liquidity crunch will remain and that makes it critical for any carmaker to offer attractive financing schemes,” Singh added.

Queries sent to Uber India and Ola Cabs over email on 30 March remained unanswered until press time.