Uber, Ola drive growth for car firms

App-based service providers take an increasing part of marketing attention; stigma of vehicle as cab disappearing

In the first nine months of this financial year, Maruti Suzuki India sold a little over 60,000 cars to cab aggregators, six per cent of sales.

For all of 2015-16, it had sold 48,000 units to these entities. This segment, still nascent, appears on course to account for 15-17 per cent of passenger vehicle volumes by 201920, says ICRA.

Original equipment makers (OEMs) are keen to tap this. Maruti, Tata Motors, Mahindra and even German luxury carmaker BMW have tied up with aggregators Ola and Uber. In FY16, 5.8 per cent of Maruti sales came from the taxi segment; for Tata Motors, it was 35 per cent; for Toyota, 23.9 per cent. For Mahindra, around 20 per cent, says an ICRA report. In all, it says, fleet sales, including to cab aggregators, accounted for about nine per cent of passenger vehicle (PV) volume. This should approximately double by FY20.

Subrata Ray, senior group vicepresident at ICRA, says taxi segment volumes will see double-digit growth in FY17, resulting in their share in domestic PV sales rising from nine per cent in FY16 to 11 per cent.

A Maruti spokesperson says: “In the first nine months of FY17, we have seen growth of about 67 per cent over the previous year in sales to cab aggregators. It is difficult to estimate the size of the market.

But, given the running cycles of cabs, we foresee shorter replacement cycles for cars, triggering more demand (for cars).” The company now has a product offering in the form of the Dzire Tour for this segment.

Shekar Viswanathan, vice-chairman, Toyota Kirloskar Motor, says when a specific car model sees traction in the taxi segment, it is a testimonial of quality and durability. “On an average, taxis are in use for 16 hours a day; private cars are used for about an hour a day or so.”

He says the earlier stigma associated with a car model becoming a popular taxi, devaluing its brand, is almost gone. Even popular personal car models have seen significant traction from fleet operators, without denting their popularity. For example, Honda Cars India has experienced this with the Amaze. “Apart from personal usage, Amaze has particularly picked up in the aggregator market; 18-20 per cent of Amaze sales in this financial year have come from this segment,” says a Honda spokesperson.

Last December, Tata Motors decided to market its Bolt hatchback to taxi aggregators. Mayank Pareek, president, passenger vehicle business unit, had said they could not ignore aggregators, in contrast to what it had sid in 2014. The Bolt was launched in January 2015 but did not take off as the company would have expected. A company spokesperson later said, “We are finding tremendous potential in this new emerging segment of appbased cab aggregators and are receiving an encouraging response with them to the Bolt, Zest, Indica and Indigo. Tata Motors will continue to focus on customer-centricity to offer transport solutions, led by technology and design, whether for the personal or commercial segment.”

In sum, taxi aggregators, once seen as a threat to carmakers, are now being seen as saviours. It is estimated that Ola and Uber have signed purchase orders with OEMs worth ~ 15,000 crore. In September last year, Mahindra and Ola had tied up for 40,000 vehicles over two years.

Some companies have also begun developing separate sales and marketing units for catering to this segment. Abdul Majeed, partner at consultancy PwC, feels OEMs might also look at developing dedicated service infrastructure for fleet operators and also sell through channels other than dealers.

Viswanathan says Toyota already has an institutional sales team in place, which they plan to strengthen.