Change your mind and your car
To buy or not to buy a car' has huge implications for our country, particularly when there are over 400 million millennials involved.
The auto industry (~7% of our GDP) must keep adapting to changing economic, tech and demographic trends. Will renting vs. buying schemes help revive the sector?
‘You got a fast car, I got a ticket to anywhere…' said Tracy Chapman, many years ago. The lines capture (and perhaps somewhat reflect) the allure and excitement of the car business even today.
Just recently Maruti rolled out a monthly subscription programme for a range of cars. The scheme allows people like you and me to drive out of the showroom with a new car without owning it, by paying an all-inclusive monthly fee. The amount covers maintenance, insurance, roadside assistance, and other boring details that usually make car buying a cumbersome process.
The slowdown due to the pandemic is clearly pushing the industry to think innovatively. Not that leasing of cars is new. Globally leasing programmes can be quite popular, especially in recent years. In India, the car rental and leasing market was only about 4% of the market in 2019, but it is expected to grow.
Especially since after COVID-19, many are hesitant about ordering a taxi, car-pooling and using shared mobility services. The potential is vast. ‘To buy or not to buy a car’ has huge implications for the country.
Last year Nirmala Sitharaman blamed the millennials and their preference for ride-sharing apps like Uber and Ola, for the decline in the automobile industry. Her worry stems from the fact that the auto sector is one of the most important drivers of growth. It accounts for 7% of our GDP, employs millions and is closely integrated across global value chains.
When over 400 million millennials are involved, buying decisions can be critical. Which is why policymakers all over the world are struggling to understand our choices. A lot has been said about the reasons why millennials are not buying cars. Perhaps their unencumbered lifestyle does not allow for a heavy-duty purchase. The traditional measure of success - a big house and a big car is out of date. Ordering a cab through an app is just so much more convenient, why bother with the stress of decision making, and the hassle of maintenance that follows it.
However, it may not always be an esoteric lifestyle choice, their decision could also be centred around more mundane financial reasons like an economy in slo-mo, lack of job security and financial stability in a gig economy and so on. We may never fully understand why, but it is important to continue to find ways around it.
The auto industry must adapt to survive. So much is changing and so fast.
The sector has been in a state of flux for the past few years. Electric cars are just starting to take off in India because of the falling prices of batteries and government support. Shared mobility services offered by the likes of Uber and Ola have changed the way we commute, especially in urban areas.
Connected cars will soon be a reality, driven by the penetration of smartphones and low data costs. And enough has been said about autonomous cars. The possibility of a driverless car once seemed to be limited to a scene of a sci-fi movie but is now already on the roads.
All this is just a few years. Who knows what lies ahead. Global trends are causing disruptions again and again. But these jolts are also an opportunity to reinvent the business and survive. Carmakers have to consider the integrated impact of social, economic and tech trends that will shape their future. From simply taking us from one place to another, the car is evolving into a giant device that will allow us to communicate, read, work, access multimedia services and connect to home, all during the journey itself.
Schemes like this might not shake things up in a big way, but they are an important offering in an evolving marketplace. It is not just the product, features and technology that must upgrade, services need to keep up too, for ‘fast cars’ keep rolling in.