Auto sector slowdown: Ola, Uber may not be that strong a factor for decline in car sales, says Maruti Suzuki

  • On 10 September, Nirmala Sitharaman had said a change in the mindset of millennials, who now prefer taxi aggregators like Ola and Uber, also had an impact on the auto sector slowdown

  • Ownership pattern in India still has not changed and people purchase cars with an 'aspirational aspect', said Shashank Srivastava of Maruti Suzuki (India)

  • Motorcycle sales last month declined 22.33 percent to 9,37,486 units as against 12,07,005 units a year earlier

India's largest carmaker Maruti Suzuki India said millennials opting for ride-hailing services like Ola and Uber may not be that strong a factor for the current slowdown in automobile sales. A detailed study is needed to arrive at any conclusion on the contrary, according to a top official of the country's largest carmaker Maruti Suzuki India.

On 10 September, Nirmala Sitharaman had said a change in the mindset of millennials, who now prefer taxi aggregators like Ola and Uber instead of committing for monthly instalments to own a car, was among one of the many factors responsible for the slowdown in the automobile sector.

"The Ola and Uber factor may not be strong to contribute to the current state of slowdown. I think we need to watch and study it more before arriving at such a conclusion," MSI Executive Director (Marketing and Sales), Shashank Srivastava said.

Ownership pattern in India still has not changed and people purchase cars with an 'aspirational aspect', Srivastava said in an interview.

"Ola and Uber came into existence during the last six-to-seven years. In this period, the auto industry also saw some of its best times. So, what happened only during last few months that the downturn became so severe? I do not think it is only because of Ola and Uber," Srivastava said.

He gave the example of the US market, where Uber is a big player and the car sales in the last few years are robust. "In India, 46 percent of the car buyers are first time users. It is an aspirational behaviour. People may use public transport like Ola and Uber to go to offices on weekdays, but still they buy a vehicle for the weekend outings with the family," Srivastava explained.

 Auto sector slowdown: Ola, Uber may not be that strong a factor for decline in car sales, says Maruti Suzuki

Representational image. Reuters

"The pattern of ownership in India has not changed yet. We have to watch on a longer period to see if there is a structural change in buying pattern," he added.

Srivastava said there are many reasons for this downturn in the auto market such as liquidity crunch, increased prices of products due to regulatory issues, higher taxes and rise in insurance rates.

He also said the government's measures announced last month to tackle the slowdown is not sufficient and those are helpful for long term health of the industry as they basically addressed the sentiments of the customers.

Fall in domestic vehicle sales in India

India’s monthly passenger vehicle and car sales recorded their steepest fall ever in August, according to the Society of Indian Automobile Manufacturers, highlighting the continued slowdown in the sector amid assurances by the government for revival.

Domestic passenger vehicle sales fell for the tenth straight month in August, declining 31.57 percent to 1,96,524 units from 2,87,198 units in the year-ago period. Previously, the worst decline in the segment was registered in July this year when wholesales had fallen 30.98 percent to 2,00,790 units.

From April to August period, the sales have fallen by 15.89 percent to 97,32,040 units from 1,15,70,401 units in the year-ago period, SIAM had said.

Srivastava said MSI has launched new versions of its various product range and the company is hopeful of some positive results during the forthcoming festive season.

When asked if the company regrets the lukewarm response from the government in handling the situation and absence of any stimulus package, Srivastava said: "The government knows the exact situation. I believe they have to take care of the entire economy. I am sure they will do the best for the economy and the industry."

MSI's domestic sales in August dipped by 34.3 percent to 97,061 units from 1,47,700 units in the same month last year.

Automobile sector slowdown in India

All vehicle categories witnessed a decline in sales during the month.

In the PV segment, market leader Maruti Suzuki India posted 36.14 percent decline in its August sales at 93,173 units. Hyundai Motor India Ltd (HMIL) also witnessed 16.58 percent decrease at 38,205 units, while Mahindra & Mahindra posted a fall of 31.58 percent at 13,504 units during the month.

SIAM said passenger car sales in August were also the worst ever. Last month, domestic car sales were down 41.09 percent at 1,15,957 units as against 1,96,847 units in August 2018.

Besides, total two-wheeler sales last month declined by a record 22.24 percent to 15,14,196 units compared to 19,47,304 units in the year-ago month. Commercial vehicle sales were down 38.71 percent to 51,897 units in August as compared with 84,668 units in August 2018.

Similarly, motorcycle sales last month declined 22.33 percent to 9,37,486 units as against 12,07,005 units a year earlier. Scooter sales declined by 22.19 percent to 5,20,898 units as compared with 6,69,416 units in August last year.

In the two-wheeler category, Hero MotoCorp registered a 20.97 percent drop in sales at 5,24,003 units, while rival Honda Motorcycle and Scooter India (HMSI) saw sales decline by 26.26 percent to 425664 units.

Similarly, Chennai-based TVS Motor Co saw its sales slump by 20.37 percent at 2,19,528 units in August.

On the other hand, August retail sales data showed a somewhat better picture in terms of sales, pointing to inventory correction taking place in the industry.

As per retail sales data also provided by SIAM, total automobile sales declined by 4.15 percent 16,00,376 units as compared with 16,69,751 units in August 2018. Similarly, PV sales stood at 2,38,357 units last month as compared with 2,56,662 units in the same month of last year, a decline of 7.13 percent.

Besides, total two-wheeler retail sales declined by 3.4 percent to 12,42,452 units in August as compared with 12,86,176 units in the year-ago period.

With prolonged slump in sales, automobile and component manufacturers have been seeking GST cut on automobiles to 18 percent from 28 percent to help the sector come out of a prolonged slump that has resulted in job losses.

The next GST Council meeting will be held on 20 September in Goa.

Updated Date: Sep 12, 2019 10:24:29 IST