India has never topped the vehicle ownership charts. While two- and three-wheelers are ubiquitous across the sub-continent, passenger cars and commercial vehicles (CVs) are a different story. At the end of 2018, India had an estimated 52 million cars and CVs in operation. But with a population of 1.33 billion, that puts the car ownership rate at a mere 39 vehicles per 1,000 people.
These are just the latest figures, but they are representative of a long-term trend. For years, global automakers have looked at that low rate of ownership and seen potential, but their grand plans to conquer the market have seldom gone to plan.
The Automotive World report, India’s new vehicle market: prospects to 2023, flags the number of new entrants that have been lured in by low car ownership rates and a rapidly expanding pool of potential buyers. As Jonathan Storey, the author of the report, explains: “That rationale has proved an inadequate basis for investment as, where foreign vehicle makers are concerned, India has seen more losers than winners. Most foreign automakers’ Indian operations have been a waste of resources for most of the past two decades, losing money or, at best, making an insignificant contribution to global profit.”
There are plenty of examples. VW Group went in with the aim of grabbing a 20% share of the passenger car market by 2018. It managed to reach a high of 4.1% in 2012 but that has since dropped to 1.0%. Then there’s Fiat, which seemed to have done something right in the early 2000s when it managed to secure a 7% share of the passenger car market; since then, however, its momentum has slowed. The final straw was the arrival of new crash test standards, requiring financial investments too costly for the miniscule line-up to support. In the end, it decided to walk away from India entirely.
An alternative approach
Meanwhile, new shared mobility concepts could offer fresh opportunities for brands that have struggled to sell their vehicles to private individuals. At the same time, approaches like ride-sharing and car pooling could go far in tackling the country’s notorious road congestion in urban centres.
The Boston Consulting Group’s study, ‘Unlocking Cities: The impact of ridesharing across India’, commissioned by Uber, found that congestion across Delhi, Kolkata, Mumbai and Bangalore was costing the cities more than US$22bn every year. The study’s authors predict that a reduction of 33%-68% in private cars could reduce congestion by 17%-31% across these four cities.
Interest is clearly there. Ford launched a shared mobility pilot in collaboration with local start-up Zoomcar in Bengaluru four years ago. Share-Car introduced the idea of a single vehicle shared by a small group of individuals, such as families, co-workers and neighbours. While the pilot only ran for a limited time, it helped facilitate a model for vehicle scheduling and managing ownership. Today, Zoomcar offers an app-based service for users to rent cars by the hour, day, week or month.
More recently, Ford launched the Office Ride scheme in Pune. As the name suggests, it is designed to help commuters share their journeys. Users manage and pay for their requests through their mobile phones. And notably, smartphone usage is set to skyrocket. Cisco predicts India’s connected devices ecosystem will jump to 2.2 billion by 2022, up from 1.6 billion five years before. Smartphones alone will account for 38% of this, growing at a compound annual growth rate of 15.5%.
India’s history with the telephone says much about its market evolution tendencies. Landline telephone numbers remained consistently low over the years, but residents have been quick to adopt the cell phone. As of April 2015, the country had 26 million landline subscribers but 970 million mobile subscribers. For many Indians, it was a case of leapfrogging the landline entirely.
Should we expect to see a similar trend in vehicle use, with the bulk of residents bypassing private ownership for shared mobility? Most agree it is too early for such bold predictions. Some industry watchers, like Storey, expect to see a steady rise in sales volumes in the coming years, but not necessarily a profitable rise. “Despite the many pitfalls, the lure of emerging markets such as India remains strong and for every brand that has given up, at least one more is poised to take its place,” Storey commented. “That, of course, means that competition will remain intense and profits for most will remain thin unless market volumes increase substantially.”