Are Ola, Uber Responsible For Auto Slowdown? Maruti Suzuki Doesn't Think So

Automobile sales have been experiencing a constant sales drop in India. Recently, Finance Minister Nirmala Sitharaman blamed the crisis on the rise in the use of Ola and Uber by millennials. However, the largest auto maker in the country - Maruti Suzuki begs to differ.

"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 told PTI. Srivastava further stressed that people in India still buy cars and other vehicles with an "aspirational aspect".

The ¡°conclusion¡± mentioned above has been under massive scrutiny online. Rightfully so, as there is no hard evidence of the increased use of ride sharing systems hampering the sales of vehicles in India.

Dear FM, People vote the MP/minister to Foresee the Issue, make Policy and implement it, Don't balme us.
Nirmala Sitharaman Blames Mindset Of Cab-Addict Millennials For Automobile Slowdown https://t.co/6aV09j48Gv via @indiatimes

¡ª Jane Alam (@im_JaneAlam) September 10, 2019

A look at other markets

Srivastava¡¯s comments carries a working example as a proof. A look at the other countries with considerable ride sharing networks, like the US and the UK, easily reveals that there is no direct connection here. There is mostly a simultaneous growth in both the segments.

This was the case even in India, at least till the last few months, which have seen the worst slump in sales for the auto industry. Srivastava put this into words - "Ola and Uber came into existence during last 6-7 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."

The appeal of vehicle ownership

Blaming the sales drop on ride sharing services can be translated to a loss in the appeal of vehicle ownership in India. This, however, is not the case as per Srivastava. He stresses that buying a car is an ¡°aspirational behaviour¡± for the people of the country and while they might use the services of Ola and Uber, they still like to own a vehicle for personal transportation on demand.

Srivastava shared a strong statistic to back this - "In India, 46 per cent of the car buyers are first time users.¡±

(Representative Image: Reuters)

So who is to blame?

The finance minister had mentioned that the use of Ola and Uber is ¡°one of the many factors¡± for the slowdown. Srivastava clears that its due to these ¡°other factors¡± that the situation is what it is. He mentions the factors to be - ¡°liquidity crunch, increased prices of products due to regulatory issues, higher taxes and rise in insurance rates.¡±

Most of these factors can only be regulated by the government. Citing this, the Society of Indian Automobile Manufacturers (SIAM) recently appealed to the centre to come up with measures to tackle the situation.

Following this, the Finance minister announced that the government departments would now be allowed to buy new vehicles. In addition, she also cleared the confusion around the BS-VI compliance, confirming that the vehicles with BS-IV compliance can continue to be operational on Indian roads till their lifetime. This was meant to instill confidence in Indian buyers on buying vehicles now.

Srivastava, however, feels that these measures are not sufficient. While the measures ensure the long term health of the industry, they would not have any major impact on the ongoing sales slowdown. He is still hopeful though, saying, "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."

(With inputs from PTI)