Weekends for cabs

Ola, Uber & Young

Win win for all

MUMBAI: Akshat Kshetrapal, an executive at a Delhi-based conglomerate, did something this month that Travis Kalanick, the globally famous CEO of Uber, wants lots of people to do — Kshetrapal sold his Hyundai i20 car and decided that he will use cab-hailing services like Uber for his rides. Kalanick had said in a Twitter post this year that his intention is “…to make Uber so efficient, cars so highly utilised that for most people it is cheaper than owning a car”.‘Take a cab, don’t buy a car’ is urban India’s newest trend, still nascent but likely to get stronger, as both experts and auto companies think.Consumer and industry implications may include a change in auto firm strategy, an even more rapid scaling up of cab hailing services like Uber and Ola and India twist in the usual story of rising incomes corresponding with rising car ownership. Kshetrapal told ET giving up his car for cabs was purely based on conomics and convenience.Owning a car, Kshetrapal would spend about Rs 23,000 a month on fuel and drivers salary. Taking cabs to and from office costs him Rs 8,000 a month. Add to this the cost of acquiring the asset — the car — maintaining it and paying for parking, provided you find a parking space. For many urban Indians, especially in the top three metros of Delhi, Mumbai and Bengaluru, the economics is compelling. Even CXOs of auto manufacturers think so.A very senior executive of a leading carmaker, who did not wish to be quoted, told ET he prefers app-based cab services for weekend trips with family than using his car. Parking is a hassle he says, and driver’s off on Sundays. Auto industry is taking note.An auto company CEO who wished to remain unidentified said an internal meeting with dealers and vendors was dominated by discussions whether timely and cheap cab services will reduce incentives for car ownership. Mayank Pareek, president of Passenger Vehicle division at Tata Motors, told ET services like Uber and Ola are “a big change and as a major responsible manufacturer, we really need to understand how this will pan out and we need to see what role we will play in this”.Less surprisingly but equally importantly, executives of organised cab services say the same thing. Spokespersons of both Ola and Uber told ET they have feedback from customers who have given up their second car or not bought the second car.Experts say just as car ownership is low in India — around 18 cars per thousand people, compared to 800 per thousand in the US — and indicates a vast future market, share of organised cab services (7% of two million cabs) in India’s cab fleet is also low, and points to a big growth in that segment.How the growth of timely, cheap cab services will affect car buying decisions is the question.Ola and Uber, the top two cab rental companies, provide six lakh rides a day between them and are growing 20% to 25% month on month. Both have huge growth plans.Seasoned business people have spotted the Uber-Ola vs cars trend. “As Ola and Uber scale up, the cost of being driven around will come down… also cost of a parking lot when buying apartments in cities like Mumbai can be more than what a car costs,” says Sandeep Reddy, co-founder of realty portal Propstack &Kotak Securities ex-analyst.There’s another factor: younger Indians aren’t so big on owning things. Even in an evolved car market like America, where owning a car is almost a fundamental right, the growth of app-based cab companies has made auto companies sit up.Ford in the US recently started a car sharing initiative that helps people let out their Ford cars to a select set of customers to reduce the cost of maintaining the vehicle.Some auto executives say the Ola-Uber factor must be viewed in the light of these companies now “burning cash” to acquire customers. They ask about the sustainability of the cash-burn model.But funds, many experts say, won’t be a growth constraint for app-based cab services for a long time.Some auto industry veterans reckon the attraction of car ownership won’t dim much because a car is more than a utilitarian asset. RC Bhargava, chairman of Maruti Suzuki, says “if people only used their car for commuting purposes, then there would be only small compact cars all around. But that is not the case, cars are considered as extension of one’s taste, personality and beyond”.Other auto industry insiders say modern cab services may kill the need for the second or the third car, but not the first. Sumit Sawhney, country CEO and MD of Renault India, says cab services “will have no major impact on the first car purchase in the family, as India is yet to see accelerated motorisation”.Gaurav Vangaal, senior analyst, forecasting, IHS Automotive, says India is too complex a country for one trend to prevail. “India is not a country, it is a continent in itself with different purchase behaviours.The metropolitan disruption looks minimal when we compare it with the whole country,” Vangaal argued. Developing this theme, Pareek of Tata Motors says growing demand for modern cab services can create new demands for auto companies.One thing is sure, auto industry will keep a close watch on the car vs cab battle. And this story again show why: Two corporate hotshots finished a meeting at a 5-star hotel in Mumbai and got ready to leave. One summoned a cab using the service’s app and the other called his driver. The cab arrived first.