As per a recent story, South Korean auto giant Hyundai wants a slice of the lucrative Indian car-sharing business, and may invest as much as $250 million in ride-hailing major Ola. Similarly, automakers such as Ford and Mahindra have invested in self-ride company Zoomcar, Toyota in Droom, and so on. Auto companies are increasingly diversifying into new revenue growth channels such as mobility solutions (ride-hailing apps), car exchange and resale marketplaces on the back of the upward growth of trends like the shared economy.

Rise of mobility in India

The fact is, month-on-month, car sales for most automakers have taken a hit over the past six months, owing to the rise of the shared economy. This is a sign of the change in consumption behaviour and ownership patterns. However, automakers have also begun realising that investing in the cab aggregator and sharing models will give them access to a wider market and help drive sales numbers.

Let’s look at the factors that are behind the rise of the car-sharing economy - lack of parking spaces in cities (specially metros such as Bengaluru, Mumbai, Delhi NCR and Kolkata), massive traffic bottlenecks and increasing geographic scale of cities/growth of city clusters impacting commute distances. These are structural problems that already exist today, and thus, mobilisation is the answer to these problems. Mobilisation is now considered as a separate segment that can provide real and sustainable solutions to the structural challenges when backed by technology/technology enablers.

Technology has a vital role to play in mobility that can lead to the emergence of new solutions and shift in consumer mindset - for example, the cab aggregator model, route optimisation and even improved public transport interventions. Mobility models, especially cab aggregators such as Uber and Ola, have become an integral part of the city life in India, and these companies have not only grown their customer base rapidly but also their valuations in the market are skyrocketing. Having said that, the long-term demand for car ownership in India will remain high as there is a strong aspirational value attached to it.

Challenges and opportunities

Car sharing has certainly played a key role in solving some of the structural issues such as traffic congestion and lack of parking spaces, and cab aggregators are here to stay. But a critical issue yet to be addressed in India is first- and last-mile connectivity, and for that micro-mobility solutions need to be explored. Car sharing, pooling and renting are effective means of commuting from one place to the other, including over long distances, however, India’s infrastructure is not able to keep pace with demand and hence micro-mobility should bridge that gap. This need for first- and last-mile connectivity is being addressed by a few bike apps such as Rapido and Vogo.

Another challenge is the development of parking spaces. Parking infrastructure is poor in India, owing to lack of planning in cities and growing number of cars - a result of a rising middle class and disposable incomes. The government should focus more on this issue along with the industry to find sustainable solutions, including PPP models.

Going beyond the issue of first- and last-mile connectivity, mobility gives rise to route optimisation and public transportation. While Zophop is a company that provides route optimisation across buses, passenger trains, metro rail, auto rickshaws and taxis with live ETA updates and smart ticketing, there is RedBus that is tapping into the demand for convenience within the public transportation system, which essentially enables bus booking and seat reservation through its app.

The outlook on mobility

2019 can see heightened M&A (mergers and acquisitions) activity in the auto sector, wherein, automakers are expected to invest more in cab aggregator and car-sharing models. Especially, the self-ride segment is expected to scale up faster than other models because supply side limitations are easier to manage than other models. With rising demand, cab aggregators are expected to deepen penetration into tier-II and III cities in India. Also, going forward, more startups are expected to come up to address the issue of first- and last-mile connectivity in India.

Use of electric vehicles (EV) may also provide opportunities for automakers to consider deployment of capital, even though the EV infrastructure is still at a nascent stage. Greater adoption of EVs, both in the two- and four-wheeler segments, is considered inevitable, to curtail pollution levels and bring down associated fuel costs.

Technology will be the backbone for automakers in the future. Data mining and analytics can be leveraged by auto companies, complying with data privacy norms, to analyse data gathered from the driver to introduce improved car models in the consumer segment. Emerging technologies such as big data & analytics, Internet of Things (IoT), cloud among others, and different modes of transport are already disrupting the status quo and changing the way people move. The pace of innovation is fast and opportunities galore, but the risks are high too, because decisions made today will lock in infrastructure for decades to come. Forward-looking and stable policies by the government will help to mitigate risks for auto companies, and foster innovation in mobility for a better future.

Sayan Banerjee is a marketing communications professional. The views expressed here are personal.