Beyond Ola And Uber: Why India’s Millennials Are Not Buying Cars

by Tushar Gupta - Sep 13, 2019 11:49 AM +05:30 IST
Beyond Ola And Uber: Why India’s Millennials Are Not Buying  CarsFinance Minister Nirmala Sitharaman
  • Here are the reasons why the millennials are shunning cars.

Earlier this week, Finance Minister Nirmala Sitharaman’s remarks led to a flood of memes online when she attributed a part of the slowdown in the auto industry to ride-hailing companies, Ola and Uber.

The Finance Minister, however, was right, but not completely.

Ola and Uber have indeed caused a shift in the millennial mindset when it comes to car ownership, but it goes beyond the two ride-hailing companies if one is to look at the larger picture.

First, to say that Ola and Uber have no relation to declining auto sales because they themselves are victims of low ride growth is incorrect. In 2019, the ride growth rate was in the range of 4 per cent, down from 20 per cent in 2018, 57 per cent in 2017, and a staggering 90 per cent in 2016. Similar growth patterns have also been observed for Uber in the United States.

This can be attributed to the following reasons. One, Uber now operates in over 40 cities in India alone. The number of operational cities has grown from 2016 to 2019, and therefore, the monumental ride growth rates can be explained.

The ride growth rate is now settling, similar to how the box office collections of a movie settle after the first weekend. Ola and Uber had their first weekend of release between 2015 and 2018.

Two, both companies are no longer shelling out money in incentives and cashback as they once did. Given they have attained a saturation when it comes to driver count in critical business cities, the focus now is on making money and eventually turning profitable (Uber, till date, has not made a single dime in operations).

This has alienated drivers who signed up for the big bucks, and many have left. In major cities, a balance between the supply and demand of cabs and riders has been attained. Therefore, workers no longer feel motivated to purchase a vehicle and sign up for a gig with either of the companies.

Second, it goes beyond Ola and Uber in terms of services. Professionals in cities have shuttles or mini-buses to choose from.

Operated by the likes of Shuttl and ZipGo, they run on high-density routes in terms of commercial spaces, especially in cities like Noida, Gurgaon, Pune, Mumbai and Bengaluru.

Far more efficient than a normal state-run public bus, these shuttle services, over a period of time, have solidified their customer base. According to a report, even Uber is planning to venture into this space soon.

Third, it’s not only about cabs for a certain duration. With self-drive car rental service companies in India, millennials are now exploring alternative options for their weekend getaways.

While Ola is testing its own service in this space on a pilot basis, companies like ZoomCar, Myles and Drivezy dominate the market, with ZoomCar alone having 70 per cent of the market share.

The success of ZoomCar offers an insight into the consumption of the self-drive car rental services. ZoomCar, founded in 2013, turned profitable in December 2017 (Take that, Uber).

For the same financial year, the losses of the company grew by 10 per cent to Rs 116 crore but its revenue grew by 31 per cent to Rs 158 crore. The company is planning to extend its services to 20 cities in 2019.

Fourth, for the ones looking to rent cars beyond a weekend, the likes of Hyundai have come up with a car subscription service. Revv, Hyundai’s car subscription service, is operational in 19 cities as of today.

The pricing model of the service makes it viable for a millennial to subscribe to a car on a monthly basis, rather than owning it, also allowing them the freedom to rent any luxury car which they may not have been able to otherwise afford. Earlier this week, Mahindra also rolled out its car subscription services on the Revv platform.

Fifth, the growth of ride-hailing, renting, and subscription services stem from the inter-state migration, indispensable to the millennial workforce.

For instance, millennials from Jammu and Kashmir, Haryana, Punjab, Himachal Pradesh, and parts of Uttar Pradesh now work in Chandigarh, Mohali, Noida and Gurgaon. In Bengaluru, more than 50 per cent of the urban population is of migrants alone.

Similar millennial migration has contributed to the rise of Mumbai, Delhi, Bengaluru, Pune, Chennai and Hyderabad, amongst other cities as India’s leading commercial and financial hubs.

Sixth, to add to this intra-state migration, there is the excessive fluidity in India’s job market.

Millennials no longer confine their work choices to one city or one state. For them, it is easy to move from Bengaluru to Noida or from Kolkata to Mumbai, thanks to the ever-growing job market, and surely, the age of the Internet. This movement can be annual or every two to three years, and thus, they see no reason to invest in assets that may become a liability if they were to move urgently.

Seventh, even if one were to ignore fluidity and the volatility with which millennial job choices work, there is not enough income growth to buy cars.

For average engineers in their 20s, working in the likes of Infosys, TCS, or HCL, the salary does not exceed Rs 4 to Rs 7 Lakh per annum. Also, many are now choosing to sponsor their higher studies instead of investing in depreciating assets like cars.

For the ones that may have money, there is a lack of convenience in going for cars. Assuming millennials do not have monetary constraints, there is the trouble of parking in societies (most millennials live in shared accommodations before marriage), and workspaces. The traffic density in cities like Bengaluru, Noida and Mumbai is repelling for any millennial looking to buy a car.

Take the example of CyberHub, Gurgaon’s biggest work centre housing some of the leading companies in the world. After speaking to a senior executive at PricewaterhouseCoopers, Swarajya learned how the parking woes and excessive traffic were driving the millennial workers towards public transport in the city.

“In our group of 30, hardly three or four bother to drive to work. Amongst the others, the ones who already have a car see it as a wasted asset, and the remaining ones aren’t inclined to invest in one,” the executive told Swarajya.

Eighth, millennials are now more inclined towards used cars, as this report shows. Around 49 per cent of the millennials who purchased a pre-owned car in 2018 were first-time owners.

In financial year 2019, used-car dealers like Mahindra First Choice Wheels Ltd recorded 40-50 per cent year-on-year growth while the market of used cars grew 10-12 per cent.

Also, the transition of the used car market from an unorganised to an organised setup has added to the trust factor, thus appealing to the millennials.

To understand why they do not buy cars, one has to go beyond numbers and look at the ecosystem millennials thrive on. Today, smartphone apps and aggregators have made possible for food, groceries, and other utilities to be delivered in minutes. In some areas, going to the market is almost redundant.

The mindset is not restricted to cars alone. The millennials are renting everything. Companies like NestAway have built a business model out of renting spaces for newcomers in different cities.

Companies like Furlenco, RentoMojo and Rentickle are enabling millennials to rent fancy furniture, expensive appliances, latest gadgets, two-wheelers, and even a box of fresh shirts.

This is a new generation with a new set of priorities in a job market that is threatened by automation and volatile demand, and in cities suffocated by traffic and pollution. They want no strings attached.

For the average millennial, liberation lies in detachment from the material. Surely, Mahavira would be proud.

Tushar is a senior-sub-editor at Swarajya. He tweets at @Tushar15_
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