Auto Slowdown Because Millennials Prefer Ola, Uber? Data Disagrees

Finance Minister Nirmala Sitharaman claims that the mindset of millennials is one of the reasons for the automobile industry crashing to its steepest decline in more than two decades.

Here are some reasons, and data, to show why her argument hasn’t really convinced us.

Is ‘Millennial Mindset’ Really to Blame?

First, let’s discuss millennials and our supposed behavioural change regarding economic priorities.

Who are millennials? Those born between 1981 and 1996, people who are currently 23 to 38 years old. If these young people are buying fewer cars and houses, does it really prove that they don’t WANT to buy cars or houses? It could also be because they can’t afford them, right?

For example, as many as 33% of India’s skilled youth between 15 to 29 years of age are unemployed, as per the government’s latest jobs data. Surely, they can’t be buying cars if they don’t have jobs, right?

But even for the ones who do have jobs, private sector salary growth in 2018-19 was the worst since 2009-10. And getting poor appraisals in a worsening economy can’t possibly send employees rushing to buy new cars.

Ola and Uber Slowing Down

In June this year, the Economic Times reported that the growth in the number of daily rides at Ola and Uber had decreased substantially.

Industry analysts and company insiders told ET that the number of daily rides had increased by just 4% in the previous six months, a far cry from the growth of 90% in 2016, 57% in 2017 and 20% in 2018.

So, if millennials are en masse giving up on buying their own vehicles, causing such a staggering decline in auto sales, then Ola and Uber should be continuing to grow at a much higher rate, correct?

Fall in Commercial Vehicle Registrations

There’s more data to prove that Ola and Uber are slowing down. For example, the fact that commercial vehicle registrations are on the decline.

In Maharashtra, there were more than 66,000 tourist cabs, which largely work with Ola and Uber, that were registered in 2017-18. But in 2018-19, that number fell to under 25,000.

The sales figures speak volumes too - commercial vehicle sales across India crashed by 38.7% in August 2019 compared to the same period last year.

What About Trucks, Tractors & Two-Wheelers?

If millennials using Ola and Uber were indeed a major factor in the sharp decline of the automobile sector, then the sale of passenger vehicles should be affected much more than other parts of the sector, right?

But then, how does one explain why truck sales went down by 60% in August 2019 compared to the same period last year? Combined, truck and bus sales dropped 39%.

Despite a normal monsoon, even tractor sales declined 14.4% year-on-year between April to June 2019.

And last but definitely not the least, let’s look at two-wheeler sales. Based on their distribution of sales, two-wheelers are considered to be a key indicator of demand in rural India. In August 2019, two-wheeler sales fell by 22%, down to 1.5 million units from 1.9 million units sold in the same month in 2018.

The sharp decline in two-wheelers is being attributed to slowing income growth for farmers in rural India. Rural wage growth, which had peaked at 27.7% in 2013-14, has come down to less than 5%.

Each of these statistics suggests that the auto slowdown is more symptomatic of an ailing economy, than it is an indicator of millennial preferences. So maybe, millennials really aren’t as much of a factor here as the finance minister would have us believe.