A slowdown in the app-based cab aggregator space has hurt the sales of cars and utility vehicles to the segment, which fell to their lowest level in five years in 2019.
Several automakers have arrangements with car aggregators such as Ola and Uber to sell vehicles to drivers who join their platforms. According to industry estimates, sales to such driver-partners in the past year were around 20,000 vehicles, recording a 35% fall from the previous year. Last year’s volume was just a fifth of the peak sales of around 100,000 vehicles in 2016, when the app-based aggregators were aggressively signing up both driver-partners and customers onto their platforms with generous incentives and subsidised fares.
The share of automakers’ sales to the driver-partners of aggregators has also dropped, to 11% of their overall fleet sales last year from 33% in 2016.
Senior executives at automobile companies ET spoke to said low utilisation of vehicles following rationalisation of incentives by the aggregators, inability of the service to penetrate into small cities and towns even as big cities neared saturation points, and poor credit profile of driver-partners had affected demand for vehicles from the segment.
“There is a substantial drop in demand (linked to cab aggregators) compared to previous years,” Maruti Suzuki executive director Shashank Srivastava said. “One of the big challenges they are facing is that there is very low asset utilisation beyond the top six cities.”
“The expectation of a driver when he gets into the segment is he will earn ₹50,000-60,000 every month. But the net earnings for drivers dropped to ₹18,000-20,000 per month because of low asset utilisation,” said a senior auto industry executive, speaking on the condition of anonymity. “The number of cars attached to appbased cab aggregators is therefore reducing. New drivers are not coming in.”
Ola did not respond to queries from ET till press time Wednesday.
Rival Uber didn’t directly comment on the purchase of vehicles by its driver-partners last year, but said the company was constantly working to ensure sustainable earning opportunities for drivers. “To that end, Uber has empowered and supported thousands of drivers from our welfare programme, Uber Care, with improved access to life insurance, financial support, children’s education, and medical consultations,” a spokesperson said.
Under the company’s ‘India to Bharat’ strategy, Uber is expanding its footprint from the current 50 cities to 200 cities by the end of 2020, the spokesperson said. “We are also diversifying our product portfolio with auto, moto, public transport, etc., to cater to all segments of the Indian population. This growth will mean further addition of vehicles to our platform.”
The sharp decline in demand from app-based cab aggregators is coming at a time when overall passenger vehicle sales are falling, too — in 2019, sales fell 12.75%, the sharpest in more than 20 years, to 2.96 million units.
GROWTH FIZZLES OUT
During the peak period, app-based ride-sharing companies were contributing about one-third to the total incremental volume of the passenger car industry, accounting also for 5% of the total passenger vehicle sales volume. The growth started fizzling out from 2016-2017, as the aggregators started gradually lowering incentives to drivers after they created a large pool of cabs in top cities and their cost structure turned unviable.
Car market leader Maruti Suzuki sold about 3,000 vehicles to appbased cab aggregators last year, compared with around 80,000 units in 2016. The company’s sales to the fleet segment last year totalled 110,000 units.
At Toyota Kirloskar Motor, about 15% of the overall sales of 126,701 units in 2019 was to the fleet segment, and 15-20% of this was through aggregators.
Toyota Kirloskar Motor senior vice-president (sales and service) Naveen Soni said sales to aggregators had slowed down in the last two years. One of the reasons is reduced support that aggregators are receiving from their investors due to business viability issues, he said, adding: “This in turn has led to lowering of driver incentives and per-kilometre subsidies being rolled back.”
Driver-partners are preferring hatchbacks over sedans as their customers are choosing small cars due to the fare advantage, Soni said.
Automakers are hopeful that faster replacement cycles of vehicles utilised by app-based cab aggregators, compared with those used for personal use, would drive demand in future. Besides, the untapped market is pretty massive. Maruti Suzuki’s Srivastava said: “App-based cab aggregators are tackling only about 10% of the addressable mobility market of $40-50 billion. The estimated market is quite big.”
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