We hear a lot about the disruptive effects of the startups on the economy. Today, startups like Uber, Ola and Airbnb are changing the way consumers think about ownership of assets. We take a look at how this sharing economy has affected the dynamics of the Indian automobile industry.
I came across this great chart from CLSA that sums up the “Uber effect” very nicely:
As you can see from the chart, almost 20 per cent of new passenger vehicle demand is coming from taxi aggregators like Uber. 40 per cent of India’s largest car maker’s sales came through this channel last year. These are incredible numbers when you consider that Uber launched in India less than 3 years ago and others did not have much presence before then. It is no wonder that industry veterans like Anand Mahindra have said that these taxi aggregators are one of the biggest potential threats to the automotive industry.
Consumers are also taking to these new startups aggressively and mindsets about car ownership are changing. In newspapers you often see calculators that help consumers decide between owning a car or switching to the hassle-free and wallet friendly experience that these services provide.
With startups in the sharing economy increasing their commitment to the Indian economy and getting more aggressive to acquire consumers, we are likely to see these trends accelerate. With increasing adoption, car sales volumes may take a hit as more people switch to sharing cars vs owning them. It will be very interesting to see how the auto industry adapts to these changes in the future.
Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.