SUMMARY
The Indian automobile industry crashed to a low of 23.5% in August; worst decline since 1997-98
The second-hand car market is booming despite the critical slowdown in new car sales
Emerging automobile start-ups are seizing the opportunity to penetrate the saturated after-sale service market in India
The automotive industry is a pillar of the Indian economy and a key driver of macroeconomic growth and technological advancement until last year which unfortunately witnessed a decline in its growth with falling sales and piling inventory.
Ever since major automobile manufacturers are reporting double-digit loss figures, unit sales are at an all-time low and carmakers are facing difficulty in shifting inventory. The latest stats (Sept 2019) show domestic and commercial sales to have dipped to 22.41% and 39.06% low respectively.
The auto sector, which contributes more than 7% of India’s GDP, one of the biggest job creators with almost 37 million jobs across its value chain, is facing one of its worst downturns which are impacting the jobs within the sector and Automotive Component Manufacturers Association of India (ACMA) reports around 1 million jobs could be on the line if the prolonged slowdown in the automobile industry continues.
Then, why are India’s tech-enabled Auto servicing startups betting big on the B2C market amidst the auto industry slowdown?
Let’s look at the Key Driving Factors:
Reviving Used Car Market
A slowdown in new car sales suggests that the demand is shifting towards a pre-owned car market because of significantly lower costs of second-hand vehicles as compared to the new ones. The pre-owned car market in India has been expanding considerably in the last few years and buying and selling second-hand cars exceeded the sale of new cars in 2018- 19.
As per the Mahindra First Choice study, the pre-owned car market crossed the 4 million unit mark in the financial year 2019 which is 1.2 times the size of the new car market. An OLX study 2019 found, 49% of the millennials who purchased pre-owned cars were first-time buyers and 74% of all cars bought by millennials were either hatchbacks or sedans.
With the rising craze for used cars, the deep-pocketed and relatively rigid automotive industry has unfolded a new line of after-sales car servicing and maintenance demand to fulfil which a new breed of startup category is emerging. Very interestingly, the rise in the second-hand car market is directly proportional to the size of the aftermarket. Those investing in a second-hand car are instinctively looking to save money on car maintenance and this is where the young multi-brand automobile service startups come into the picture.
To tap this staple but growing demand, Indian auto tech servicing startups are bringing in original service and business models that can be a befitting response to the otherwise hassles and fake spare parts issue that usually faced by the consumer market. Introducing new-age features like app-based tracking, live updates, personalized communication, and vehicle photos/videos are adding value to customer experience and creating a huge market opportunity in itself.
New Focus To Switch To EVs
India’s transition to electric mobility is not only about fighting air pollution and reducing dependence on import-dependence fossil fuel, it’s also about augmented jobs, growing economy, creating the necessary infrastructure for supporting ICE (Internal Combustion Engine) and BS-VI and retaining a competitive global advantage by creating an enabling environment for ICE and electric vehicles to coexist while allowing for a phased transition to EVs, milestone should aspire to achieve in the near future.
A strategic transition plan will allow the phased implementation of electric mobility milestones in India, and thereby create an opportunity for ICE based vehicles to coexist for the next 30-40 years. As a nation, there is also a realization that the oil & gas that powers our mobility needs may not be there forever and hence the constructive and intelligent switch to fuel-efficient and eco-friendly vehicle usage will also be key in driving business for the emerging tech-enabled Auto servicing startups.
