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Reality Check


While Finance Minister Nirmala Sitharaman has been trolled mercilessly on social media for attributing the drop in motor vehicle sales to the increasing inclination of the ‘millennials’ to use Ola and Uber services, the more serious among business commentators understand the validity of the statement. Maruti Suzuki Chairman RC Bhargava, however, does not feel this factor is a significant one and blames government policies for the meltdown. The fact, however, remains that not blaming the app hailing rides is like saying Flipkart and Amazon have not impacted the retail sector, or Swiggy and Zomato are not affecting visits to restaurants. The truth is that, if not now, the car manufacturing companies will be under even more pressure in the future. According to the 2019 Deloitte Global Automotive Consumer Study, fifty-one percent of Gen Y-Z users ‘question the need for an owned vehicle’, and the numbers are only less high for those in other age groups. Looked at from the point of view of a young upwardly mobile professional in the metros, there are an increasing number of hassles involved in owning a car, which include parking, daily upkeep and maintenance, bad traffic conditions, etc. Many use Uber and Ola on a regular basis and it is particularly useful to get home after a late night party. This is a worldwide phenomenon. Meanwhile, in India’s smaller cities, traffic congestion is a major deterrent. Some of those belonging to the car industry have blamed excessive taxation and a spate of regulatory measures for pushing prices of cars beyond the ‘purchasable’ limit. There is some truth in that and government could consider lowering GST on cars as an initial measure. At the same time, though, the car manufacturing companies must also look within. Even at the time of crisis, when factories are suspending operations and workers are sitting at home, nothing has been done to boost sales. Rather than sit on inventories, the companies ought to be holding drastic ‘clearance sales’ to recover money that is presently trapped in the ‘merchandise’. There has also been very poor analysis of market trends and preferences by the managements to anticipate demand. They keep on churning out models but few seem to be catching on. At the same time, though, some new car companies have their order books full for the next year and more. It would seem that there is a shake-out taking place and companies with greater efficiencies will prevail as has happened in other sectors. As for the complainers, it needs to be reminded that, in the good times, people are repeatedly told that ‘business is not the business of government’. Let the best companies and models win in the present day competitive environment.