The "Ola-Uber"isation of Economic Slowdown

Yesterday, our Finance Minister got the twitterati abuzz with her latest explanation of Slowdown - yes, you got it right - it was because of Ola - Uber services. She really got the social circuit buzzing with her comment that “The automobile and components industry has been affected by BS 6 [norms] and the mindsets of millennial, who now prefer to have Ola and Uber rather than committing to buying an automobile,” Here are the details of what she said.

Initially the jeering of her statement built into #boyacottmillenials trending on social media. Then many also jumped in her support - claiming that she was actually right in her analysis as the trend among young people is to not buy cars. So Is she Right or not in her analysis !?

Millennials' behaviour IS different
First let's acknowledge that surely there are less millennials who wish to buy car because they find the Ola-Uber services easy, cheap and hassle free as compared to owning a car an maintaining it. There is little data to prove it but if you look around this seems to be a growing behaviour - so for a minute let's accept the trend as live and kicking

But there are many slips
The question is does this changing behaviour explain the Slowdown specially in the auto Industry. The answer is not really a surprise - here is why

One, Ola - Uber is a recent trend and can be called in its inception - it has not grown as exponentially to be able to drive a severe slowdown in the auto Industry - in fact it is negative growth in the cars segment. Ola started operations in India in 2010 and Uber in 2013 - I am sure most of us noticed that they are becoming a craze among millennials by around 2015-16 as they started reaching rung - B cities.

Two, What exactly is the reach of these services - how many cities do they operate in !? I tried searching for that data on Ola and Uber sites but it was not easily available So I did some global search and unverified reports pin that down to about 40 cities (which is also the number of Indian cities with population of more than a million) - Let's increase that number by 50% and assume they are available in 60 cities just to err on the right side of the argument. Now we have close to 4000 cities in India with population of between one Lakh and a million.

The point I am making is pretty clear; we can possibly ascribe the slowdown to Ola-Uber trend only if they have a substantial reach - but obviously they don't have the reach.

Third, The growth of Ola Uber themselves is slowing down. Yes from a growth of 90% YOY in 2016 to a meagre 4.5% in 2019.. These services too are experiencing a slowdown like companies in most other sectors. To suggest that they are the reason for slowdown in the first place is itself ingenuity at best and is plainly a distraction at its worst.

Oh !! and not just that
Some rational readers point out that she did not just say Ola Uber - she also said moving to BS-VI norms as the reason. Yes that's true as well. But as one would realise BS-VI is sixth such norm - we weathered through to BS-IV without such a draconian fall in sales. It is foolhardy to believe that half the buyers are waiting for BS-VI cars to get launched before buying. In fact passenger vehicles saw five straight month of YOY decline of 20 plus percent. The August figure is a scary 31% out of which cars alone saw a decline of 41% yes you read it Right. (Refer the table)

There is more to the trendThat's not the complete story - Ask her, what explains a similar decline in sales of Two wheelers (refer to the table) - Five straight months of 10+% decline yoy with August touching a 20+% decline. BTW the decline is in all segments - scooters, Bikes and Mopeds.

And how does Ola-Uber growth explain the pain in Commercial Vehicles sales (refer the same table) - Five straight months of 10+% drop yoy with August decline of 40+%.

Oh !! And what about Tractor Sales decline (refer graph) Data for current month not easily available but a simple google search will tell us that the July Sales for two major tractor manufacturers M&M and Escorts fell 10% to 11% yoy in July 2019 and for M&M 17% decline in Aug 2019.

Obviously none of these slides can be explained by Ola-Uber trends.

Ms. FM we are facing a wider slowdown
One of the bigger picture view that the FM seems to be missing in her press conference is that the slowdown is not just in auto sector but is wide and will probably go deep. Textiles is reporting closure of units, Sales of innerwears (underwears & vests), of FMCG goods, of Biscuits, of Airline Traffic - all are declining.

Help us understand how they are declining??

In summary
Author-Analyst-Columnist Vivek Kaul puts it brilliantly - "We have managed to trivialise the entire economic slowdown around two points of Uber and Ola and millenials not buying cars. This is whataboutery at its very best." What we are facing is a lack of consumption/demand growth because people are simply spending less and why !? According to vivek simply because the economic environment around is uncertain even risky - consumers aren't confident of their economic security in the future hence they are saving - anticipating a rainy day. 

But I digress - we were discussing the Finance Minister's statement. In short and blunt opinion of mine - it is bunkum. At the best it is trying to distract from the larger problem but scaringly at its worst - it is a denial that a real problem exists in the economy.