Analysis
29 Jul 20

A new future for Indian Mobility

As India is struggling with exceptionally difficult conditions – both on the healthcare and weather front – the automotive industry is recording the worst results in its history. This is a sector that has never truly recovered since the GST introduction in 2017, which had a direct impact on profits and customer behavior.

2019 was not delivering the recovery the industry hoped for and 2020…, well, let’s forget about 2020. During the lockdown (from March 2020 onwards), sales dropped more than 90% across the most popular vehicle segments (passenger and commercial vehicles, 2 and 3 wheelers). Predictions for 2021 are not reassuring as automotive sales are expected to be anywhere between 10% and 30% below budget.

Nevertheless, and even if it’s not easy to remain positive during such bleak times, there’s a silver lining as the industry is now incentivized to reinvent itself. But, a quick spoiler alert before we go into detail: the future is not about cars.

Pre-Corona trends

We already mentioned that vehicles sales were underperforming before the virus outbreak. In exchange, mobility services were on the rise, with double digit growth for ride hailing providers in 2018. The steep rise of mobility in India unfortunately slowed down in 2019, but not because of a change in consumer behavior; the Indian State Governments implemented a set of new regulations that the industry had to adapt to, and, as it is the case in many Asian countries, the demand for rides exceeded the availability of drivers. Therefore, 2019 mobility growth slowed down to single digit, but the potential for further growth is still there.

The Corona reality

First, much alike any other country, Corona has affected the Indian industry, its workers, as well as the consumer. Since the lockdowns were announced, many migrant workers who had come to the bigger cities from the countryside, have returned to their homes. These people, who are typically at the bottom of the income scale, cannot afford to buy cars, and are consequently looking out for cheap solutions to stay mobile.

Next, in the cities, e-commerce, especially food and grocery delivery, is on the rise. Indian consumers have always been quick to adapt to new realities, and it’s no different this time. The increased need for deliveries has reinforced the of demand for vehicles that are cheap to source, require low maintenance and are energy-efficient.

Finally, shared mobility is obviously underperforming, as people prefer individualized solutions with low(er) risk for contamination. This affects mainly the ridesharing, ride-hailing and public transport options. The demand for asset sharing solutions, that allow people to travel by themselves or with their bubble, however, is increasing. In order to be profitable, this industry as well needs vehicles that are affordable, low maintenance and that consume as little as possible.

Towards alternative form factors

These 3 types of new demand have something important in common: the need for an affordable vehicle. Even in pre-corona, pre-electrification and pre-mobility times, India had a preference for smaller vehicles that fit the description: mini cars, as well as bikes and rickshaws have been a major part of Indian traffic for many years.

Unsurprisingly, the sales of entry-level 2-wheels and 3-wheels vehicles is already booming, registering 400% sales increase over the last few months. Both consumers and delivery companies prefer these form factors not only because of their pricing, but also by the fact that smaller vehicles move much faster than cars in India’s congested traffic.

Electrification

The attitude of Indian consumers toward electric vehicles used to be very similar to the global consumers’: TCO and range anxiety were the major concerns, to which the Indian consumer added the (lack of) perceived safety of EVs.

Gradually, these concerns have been removed:

  • ICE 2-wheel and 3-wheel vehicles underperform EVs on a TCO level, costing in average 35% less per kilometer than their petrol/diesel counterparts
  • Small EV form factors are easier to charge than cars: batteries can be removed and charged at private infrastructure, whereas cars need more expensive charging stations
  • The Indian consumer’s comfort level towards EVs has improved, as electric vehicles have become more visible in daily traffic and because the Indian Government has been expressing strong support for EVs

The combination of the success of small form factors and electrification confirms the conclusion that electric bikes, electric motorbikes and electric rickshaws, either in an ownership or usership model, will be a major part of Indian mobility consumption.

What does this mean for the Indian Fleet Manager?

Localised Fleet Management needs to reflect local realities in order to be efficient and affordable. It has been for a long time a challenge for global Fleet Managers to integrate Asian realities into global FM models where consolidation and scalability are prime parameters. Too often, corporates look for an OEM and a leasing provider in Asia, whilst the reality indicates that different and more suitable solutions are required.

As for India, corporate clients have the opportunity to become incubators for new solutions: asset sharing, electrification, mobility instead of cars. These solutions can perfectly cater for the key requirements of the Indian employee, which are about convenience, comfort, and safety. Continuing traditional models – dedicated cars for manager levels and allowances for the other car-eligible employees – does not solve the pre-covid issues (safe commuting, congestion) and even less the post-covid challenges.

In terms of conclusion, there’s a new and different future of corporate mobility in India and the role of big corporates is to understand, adapt and accelerate this future; innovation should be part of corporate DNA – and there’s a call to action for innovation and creativity in India.

Picture credit: Shutterstock

 

 

Authored by: Yves Helven
Advertorial: