Coronavirus-led boom for car, bike sales: Pleasant surprise for auto industry post Covid-19?

Post-COVID era is when the heavily-impacted world economy will attempt its shift back to normalcy, including the auto industry. We speak with Mahindra, Maruti & Zoomcar to find out how there may be a coronavirus-led sales boom in order.

By:Updated: April 21, 2020 4:50:35 PM

The world during and post the global COVID-19 pandemic is certainly going to change the way people move around, especially in a population-dense country such as India. The global index for ride-sharing platforms was expected to grow at 20% CAGR in the pre-COVID era from $ 61.3 billion in 2018 to over $ 218 billion by 2025. A study by Frost & Sullivan expected the revenue from the taxi cluster business to exceed $ 61 billion and the ride-hailing industry to cross $ 43 billion by 2025. Growing urbanisation, traffic congestion and the increasing cost of vehicle ownership were cited to be the main reasons behind the decline of vehicle sales in the personal segment.

The above-mentioned factors were growing rapidly in the Indian market before the Coronavirus pandemic struck the world. With the reality of a vaccine being at least 12-18 months away, some realities are starting to sink in. The ongoing coronavirus pandemic is likely to change the way Indians move around. Some of us who have relied intensively on Ola, Uber and public transportation are once again going to become motorists and here’s why.

Global insights

A global survey that was done by Cars.com with a sample size of over 3,000 men and women between 23 and 73 years of age in mid-March suggests that over 40% of them have stopped using ride-sharing services like Uber and Lyft to reduce the odds of catching the contagious virus.

Over 90% said they have started using their personal cars for a simple reason one would trust their own car over sitting in a stranger’s vehicle that carries several other passengers in a day. The same can be argued for a bus, three-wheeler and even local or metro trains. The study also revealed that 20% of the respondents have already started looking at investing in buying a new vehicle.

In India, the purchasing power for vehicles isn’t as high as developed countries or even China. This is where car rental/ leasing providers can make a big difference. Awareness of these services has been on the up in large cities but their providers will now need to look at aggressive offers in order to increase penetration. Speaking on these prospects, Greg Moran, CEO and Co-Founder of ZoomCar says: “We expect to see a significant spike in demand for personal mobility post lockdown. We are preparing for 3-4 x jump in demand.”

Learnings from China

A study by IPSOS reveals that as China resumes life after COVID-19, the citizens have preferred the use of private cars and less of public transportation. The number of private cars on roads in Shanghai, Beijing and other cities have almost doubled and there has been an increase in footfalls at car dealerships. In Chinese cities, where the breakout of coronavirus was severe, many residents have shown the intention to buy a new car in less than six months.

The top reasons to buy a new car were obvious. Most across the world believe that public transportation is not safe and that self-driving will reduce the chance of infection.

Such a situation from China may emerge even stronger when in India. Barring a few cities like Delhi/NCR and Mumbai, where the metro/ local rail is considered as a lifeline for citizens, public transportation is not among the favourite mode of travel for various reasons including hygiene. While India is expected to follow this trend, there might not be an immediate spike in car sales in the country. Once India resumes work, the auto-industry will first sell out the 10% of existing BS-IV stocks as directed by Supreme Court which will be followed by the sale of comparatively eco-friendly BS-VI vehicles in the country.

Speaking about the possibility of such a scenario in India, RC Bhargava, Chairman, Maruti Suzuki India Limited told Express Drives that while China did see a trend of personal cars being preferred once the lockdown was eased it’s hard to predict if the same would happen in India. The same could be possible in India but we’ll also have to see how much risk people are willing to take to travel. Given that the government is so proactive in protecting the citizens, they’ll frame appropriate guidance based on medical consultation to ensure the best balance between health and mobility.”

A clean and well-maintained car in any of India’s ride-sharing platforms is a rare sight. While we hope the COVID-19 situation changes this, the auto-industry certainly hopes for a certain revival. With millennials joining the workforce, buying and customising of a car is being shifted online. India’s automobile industry body, SIAM says that there has been an unprecedented spike in the number of visits on OEMs websites.

The shout out towards social distancing, stay-at-home orders, and nationwide lockdown are making online car shopping increasingly appealing. While the auto-industry posted its worst sales in the month of March 2020 due to the lockdown, the good news is that it has seen a spike in online bookings. Currently, almost every carmaker in India has started accepting online orders of cars and SUVs and deliveries of new vehicles are just a matter of time.

Role of electric vehicles

The ride-sharing sector and India’s last & first-mile transportation sector will recover eventually. However, there are some strong minds that believe the post-COVID-19 world will belong to electric vehicles. In India, it will begin with electric three-wheelers, electric buses, along with cars in the shared mobility space followed by penetration in the personal segment. It’s evident that almost every country is spending a lot of lifesaving money and they will eventually have to restart the economy.

Sharing his thoughts, Mahesh Babu, CEO, Mahindra Electric said: “Once we restart, there will be a lot of investment in job creation and I’m confident that post-COVID-19, these investments will go towards the ‘new economy’ with a strong focus on cleaner technologies like electric vehicles. Immediate results of COVID-19 might see people a bit hesitant towards shared mobility. We don’t see it becoming a permanent change in behaviour. It will last a little bit longer than the COVID-19 effect. In India, Shared mobility doesn’t mean people will not buy cars, it is about mobility becoming accessible and affordable to everyone and I believe shared mobility in India is here to grow along with the personal mobility segment.

On the other hand, electric three-wheeler sales will continue to grow as India continues to urbanise and the demand for last and first-mile connectivity goes up. In the EV space, shared mobility might see a lot of consolidation taking place which might not be good for start-ups and fresh investments coming in the near future.

You may also like: Self-drive car firms expect strong growth after Coronavirus lockdown ends

Conclusion

Considering how top industry captains and companies are reacting to the present scenario, it’s almost certain that the Indian automotive sector won’t be going back to the old normal market anytime soon. The new normal will bring in many challenges but multiple opportunities with it as well. With the concept of visiting showrooms expected to slow down, vehicle makers should focus more on digital showrooms to explain the vehicle, its features and specifications.

All these changes, however, aren’t going to be permanent or long-term in nature. Once a vaccine is available or if the virus weakens or our immunity shifts gears, we could see a quick turnaround to many pre-Covid-19 practices as far as the automotive sector is concerned. That said, some of the changes such as increasing penetration of digitisation and an upward trend for electric cars are expected to stay and grow further. That said, there’s always the underlying risk of a second wave of the Coronavirus striking the world and hence, the new future of selling mobility will be somewhat like the production lines in automotive plants – flexible.

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