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Anand Mahindra Predicted This Slowdown 4 Years Ago, So Is It Really The Millennial's Fault?

IndianMoney.com Research Team | Updated On Friday, September 13,2019, 01:23 PM

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Anand Mahindra Predicted This Slowdown 4 Years Ago, So Is It Really The Millennial's Fault?

 

 

Finance Minister Nirmala Sitharaman has blamed the millennial mindset of using Ola and Uber instead of buying cars for the current auto slump. The youth in India prefer to use Ola and Uber instead of buying cars.

Social Media has exploded with sarcastic tags #BoycottMillennials and #SayItLikeNirmalaTai. Some of the sarcastic remarks are Salons are closing because millennials are cutting their own hair. ‘BHEL Down, Millennials prefer Paani Puri.

Nirmala Sitharaman further added that millennials do not want to commit to EMIs. They prefer Ola and Uber rather than buying an automobile. But, could Nirmala Sitharaman be right? We need to go back 4 years to when Anand Mahindra predicted this slowdown.

Did Anand Mahindra Predict the Auto Slowdown in 2015?

Anand Mahindra, the Chairman of the Mahindra Group is known for his witty tweets. Anand Mahindra is back in the news and not because of his tweets. Mahindra had predicted the auto crisis way back in 2015. He had said that the rise of taxi-hailing apps were a big threat to the automobile industry in India.

Take a look at Anand Mahindra’s quote,

"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."

Anand Mahindra had said that a lot of youngsters, who can own vehicles today, don’t want to own one, but only need access to transportation.”

After this statement many people have come out in support of Nirmala Sitharaman. This is why Nirmala Sitharaman could be right.

  •  Nirmala Sitharaman did not present ride-sharing as the only cause of the auto slowdown. It is just one of the causes.
  • Nirmala Sitharaman did say that the BS-VI movement and high registration fees along with the mindset of millennials, is the cause of the auto slowdown.
  • Studies show that millennials prefer not committing to EMIs and use Ola, Uber or the metro.

Take a look at the Deloitte 2019 Global Automotive Consumer Study. It says there’s a tectonic shift towards shared mobility services. India is a country where more than half of the population is under the age of 25. There is a shift from owning a car to ride-sharing through cab aggregators. This is bound to hit the automotive sector.

A Morgan Stanley report predicts that by the year 2030, India would experience an explosion of shared mobility services. Uday Kotak, the Chairman and MD of Kotak Mahindra Bank had said that the auto sector has to be flexible to meet structural challenges which are posed by Ola and Uber. Ola and Uber are here to stay and so is the millennials preference for them. The impact of Ola and Uber would be felt on vehicle sales over a 10-year period.

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Anand Mahindra Predicted This Slowdown 4 Years Ago, So Is It Really The Millennial's Fault?

Why Ola and Uber?

  • Urban spaces are very congested and poor infrastructure means parking is very difficult.
  • Roads are badly maintained, which makes riding very difficult.
  • Expensive car ownership and low resale value deters millennials from buying cars.

Cab aggregators like Ola and Uber are a solution to all these problems. Shared commuting brings down the transportation costs. People take taxis rather than own and drive a car. Buying a car is expensive, maintaining it is expensive and city infrastructure doesn’t support quick personal travel. Ola and Uber bear all these burdens and tech savvy millennials prefer them.

Automobile Manufacturers Join with Cab-Aggregators to Beat the Slowdown

  • Maruti has joined with cab aggregators to create an alternate demand source. Maruti is offering the stripped-down Alto H1 variant and its EV cars to Ola and Uber.
  • Mahindra and Mahindra has invested in Glyd, a Mumbai app-based taxi business. Glyd has only electric cars on its app. It is designed just like Bengaluru-based-all-electric-cab company Lithium.
  • The South Korean Giant Hyundai Motor India will supply affordable and mass market electric cars to Ola from 2022-23.

As Automobile manufacturers join hands with car aggregators, the trend is clear. There is no choice but to join hands with the powerful cab aggregators.

What CEOs of Automobile Companies Say On the Auto Slump?

RC Bhargava the Maruti chairman has said that the common man cannot afford a car. The two-wheeler guy cannot afford to upgrade to a car.

Additional safety standards like costly airbags and ABS along with the shift to Bharat Stage V1 have made cars costly.

People who cannot afford a car still go on car journeys with their family. They simply use cab aggregators. Cars are not a status symbol and youngsters prefer capacity utilization. 

RC Bhargava also says that cab aggregators are good for the economy. A person who owns a car may drive 8,000 -10,000 Kilometers a year. A cab-aggregator vehicle runs 60,000 – 1,00,000 Kilometers a year. This is higher usage of the vehicle. This is good for the customer and the manufacturer. It brings value to the company.

Anand Mahindra says that car ownership in India will not stop. People are not buying cars to go round cities. They are buying cars for travelling between cities and for recreational purposes. People are buying cars for recreation, luxury and to express their individual personality. Anand Mahindra also said that people are getting familiar with electric vehicles through Ola and Uber. This would entice people to buy more electric cars.

Rajiv Bajaj says that the auto crisis is due to overproduction and not due to economic slowdown. He also says there’s no need for a GST cut. The industry is rapidly correcting stock levels to meet Bharat Stage-V1 emission norms. This problem can be corrected soon.

Are Millennials the Cause of the Auto Slump?

  • A high GST rate of 28% on cars and SUVs could be the cause of the auto slump.
  • The unemployment rate in 2017-18 was at 6.1%. This is the highest in 45 years. Could this be the reason for the auto slump?
  • Ola and Uber operate in major cities, metros and tier- II cities. They don’t have much of a presence in rural areas. So, why have vehicle sales slumped in rural areas? Is there a rural slowdown?

Well, Ola and Uber have slowed down auto sales in India. The automobile industry must adapt to the change to survive and grow.

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