Ola and Uber

Mahindra Group chairman Anand Mahindra today opined that taxi-hailing apps like Uber and Ola are the biggest potential threat to the automotive industry, which must create new products that customers love to own and not just use as a means of transport. "The age of access being offered by taxi-hailing apps like Uber and Ola is the biggest potential threat to auto industry. Since these apps operators have made transpiration a commodity, (auto) sales could be hit and volumes get impacted," Mahindra said here. He was talking to reporters after launching M&M's first compact SUV, TUV300, from an all new platform at the company's plant in Chakan, Pune. Mahindra said the problem gets confounded as "a lot of youngsters who can own vehicles today don't want to own one, but only need access to transportation ." Mahindra, however, expressed hope "people will own those things which they love" and called upon the auto industry to create products with passion so that they induce a desire in customers to buy cars and not just meet their automotive needs. "The job of automobile manufacturers is to passionately build something that others love to own," he said. It can be noted that US-based taxi-hailing app Uber, which despite running into some troubles following the rape of a woman passenger by one of its drivers last December in Delhi and other regulatory hurdles, is investing USD 1 billion here so that it can ramp up its daily ridership to 1 million by March next year. Uber wants to increase its India presence from the present 18 cities. Industry estimates peg Uber's daily rides at around 2,00,000.

Similarly, its domestic rival Ola, which leads the market in terms of number of taxis, drivers and riderships by a wider margin, is also getting millions of dollars of investments to increase its market share. Ola is backed by Japanese and American firms and a clutch of other investors. Others like Meru and Tabcab which are also growing rapidly and such app and phone-based taxi services are tilting the balance against cars faster than expected. Low cost of ridership is forcing many people in over-crowded cities like Mumbai, Delhi and Bengaluru to opt to just hail taxis and not buy vehicles. While Uber charges Rs 10-13 per km, Ola offers at around Rs 13-16 per km, thus making a daily tax ride much cheaper than owning a financed car. Mahindra further said the impact of the current age of access is that "a lot of people, who can afford a vehicle are deciding against owning one. They just need access to transport. So, our job is to offer wider choices to consumers with more innovative models."

For generations of Indians, owning a car has been a status symbol, a clear statement of having arrived in life. The desire to buy new cars has led to choked roads and rising pollution in all major cities, as infrastructure struggles to keep pace with the car-buying frenzy. So everyone took notice when Anand Mahindra, the chairman and managing director of Mahindra & Mahindra, said that taxi-hailing services such as Ola and Uber might push customers to choose commuting in cabs than own cars. “I have no doubt that it is going to affect the world and it is going to affect the volumes in the auto industry. Young people very rarely need to own anything,” he said. That in turn would hit auto sales volumes. It is not going to happen overnight, but it might be coming sooner than what people would have predicted, before the taxi-hailing apps arrived. The shift in preference away from owning cars has happened in other parts of the world, in cities like San Francisco, New York and London for example, which have excellent public transit systems and parking is expensive. Millennials, who are more conscious about the environment and prefer spending on gadgets than cars, mostly opt for the subway or metro than navigating their way through the city’s streets. The situation in India was different. It was only in the early part of this century that car ownership really took off, with a host of foreign players setting up their own factories to churn out small and mid-size

cars. Maruti Suzuki, India’s largest car company by sales, also ramped up its own production to cut wait times and meet burgeoning demand from a new generation for whom owning a car was finally feasible, as incomes rose. Finance companies tied up with sales outlets to offer easy loans. Today, you can even buy a car online on sites such as Quikr, the classifieds portal. In Delhi, India’s largest car market, 1,400 cars are bought everyday and India is among the fastest growing car markets in the world. Until a year ago, it seemed far-fetched to even think of a future where people won’t want to buy cars, despite the costs to the environment. In 2014, San Francisco-based Uber disrupted the way traditional cab companies operated in India, as it did in most other places it entered. Neighborhood taxi stands in Delhi were often unreliable and over-charge customers. Other taxi services such as Meru and EasyCabs had way fewer cabs than demand, and booking them was a hassle over phone. The situation was even worse in smaller towns, many of which never had organized cab operators, who account for just ten per cent of the $15 billion market nationwide. Uber quickly grew as it attracted customers who wanted a seamless way to book cabs that would arrive on time. So did Ola Cabs, its homegrown rival that is now bigger than any other taxi operator, with plans to quickly reach a million rides per day, and presence in 200 cities. And the services can be as cheap as a regular auto ride. “Yes, absolutely. Uber has transformed how millions of commuters get around their cities more reliably and safely. As a result more and more people are re-evaluating car ownership altogether. With Uber, everyone has access to high quality transportation options at the push of a button. This is a game changer and not only significantly improves transport

efficiency and by reducing congestion (over time), but also increases reliability,” an Uber spokesperson said, in a chat withDEALSTREETASIA. The phenomenon means that owning a car, with its attendant problems of finding a parking space in India’s densely populated localities and regular maintenance, is more expensive compared with a cab ride. “Such services are a big change and as a major responsible manufacturer, we need to understand how this will pan out and we need to see what role we will play in this,” Mayank Pareek, president of passenger vehicles at Tata Motors, had said in July. Mahindra has now added his influential voice to the same issue. “The age of access is here. There is going to be increasing number of people who would want access to transportation and not own object of transportation. So what are the opportunities?” Selling to drivers of Ola and Uber is one way out. Currently Maruti’s Swift Dezire dominates this category, just like Mahindra Logan did when Meru used to be the dominant cab service. “Clearly, new models will have to get more appealing than the past. And instead of treating Uber and Ola as a threat, they can leverage the opportunity to even supplying to these aggregators,”said Gaurav Vangaal, senior analyst with IHS Automotive.

Will the popularity of taxi services make car ownership a less popular aspiration? Akshay Chaturvedi, business head, ZigWheels.com Cab hailing, trip sharing (Ryde, Bla Bla Cars) and easier car B2C rental services like Zoomcar would definitely capture a lot of need states hitherto untapped and unfulfilled. For

example: real-time requirement of a cab for travelling to an airport/railway station or a local mall without worrying about parking. The need to avoid multiple car ownership in a household for infrequent requirements. Getting to drive or being chauffeured in a luxury car that one can't afford or inter-city travel on account of unavailability of train tickets. However, having set the context, I would stick my neck out to say that in the short to midterm, these will not have any significant impact on car sales or ownerships in India. This flows from multiple reasons - India still remains the most under-penetrated country with respect to car ownership, the entire ecosystem of these services needs to stabilise, whether it's regulatory framework, security concerns or the geographical footprint. India is an extremely value conscious market. So, while the entry level pricing of an Uber may be enticing, the moment the rates go up in future expect a lowered retention. Millions of households who would enter the middle-class in the times to come would want to cherish their ownership of a car which still symbolises more than just being a mobility need. Lastly, government thrust on infrastructure and projects like smart cities would definitely mean more cars and better ownership experience. So, I would say that India, which anyway is fairly low on car ownership in the world (China sells as many premium/luxury cars in the country as the overall car sales in India and sells almost 11x of cars sold in India, annually), is not going to witness a decline in car sales anytime soon. Karun Arya, communications lead, South Asia and India, Uber In today's world, as people get busier and the pace of life continues to rapidly increase, commuters would prefer to not waste time driving in traffic and then looking for parking; it does not make sense to be looking to try and hail a taxi or haggle with the driver either. For decades, the way you call for transportation, use and pay for it, has not evolved. Cab hailing services like Uber have transformed how people move around in their cities by bringing unprecedented levels of transparency and accountability to provide a safe and affordable alternative. This new alternative actually complements and improves existing infrastructure, creates thousands of jobs and ensures the overall quality of service improves. In cities across India where you have uberGO and uberX, these are some of the most affordable options to move around, sometimes even cheaper than autos and normal taxis. When you factor in other costs for parking, insurance and maintenance, commuting with Uber can quickly become a more cost effective solution to car ownership. By connecting people with a more affordable, high quality option, more people are reevaluating buying new cars, which for decades has also been a sign of social standing.

Sakshi Vij, executive director, Carzonrent India (operates Myles, a self-drive car rental) These services are actually a solution for car buying experience in India. It is an extension of how the car sales will happen in the market. Consumers, today, must have alternate mode of ownership, which may not mean committing to own the vehicle, but the product being available to them all the time. This is where the concept of car renting and sharing stemmed from. Globally, wherever this has happened, it has created an interesting dimension for car manufacturers to sell their vehicles. I can exemplify from Myles' perspective where we have collaborated with Tata Motors, which in turn shows automobile companies' belief in car sharing services as alternate modes of transport. Myles is a connector between consumers who want to own cars and drive them. For the longest time, the only way to own a car was when an individual earned enough to one. Services like ours are expanding the market, allowing the consumer to experience driving, and these will be the probable customers for automobile companies. Ranojoy Mukerji, auto expert Every time a new aggregator enters the market, the sales of cars go up. With the new ruling that aggregators have to own their own fleet of vehicles and not outsource them, the car sales will only go up. I believe cab hailing and renting services, like Uber and Myles, will not affect car ownership decisions in India. The Indian market is very different from that of more developed economies like US. People will like to buy their own car. Cab hailing services are availed by consumers for different reasons and times, but they will not substitute it for their own car. Therefore, while such services will serve their purpose and aid in easing out transportation woes, they will not affect the car buying decisions of consumers at large.