Ola/Uber’s Contribution to New Car Sales

Ola/Uber cabs are a common sight on roads. We often tend to blame these ride hailing companies for the traffic mess that’s on the road. But have you wondered what percentage of new passenger car sales can be attributed to Ola/Uber? Is it 10%, 5% or 1%? Actually the percentage is in low single digit number.

According to a June 2019 report in Economic Times, Ola and Uber are doing a total of 3.5 million to 3.6 million rides a day. A cab driver usually does 10 rides a day (some drivers do a fewer rides, while some do upto 15 rides a day to earn incentives). This means that 3.5 million daily rides are offered by 0.35 million drivers or 3.5 lakh drivers. This in turn means that Ola and Uber put together have 3.5 lakh cabs on the road on any given day. Assuming drivers work 6 days a week, Ola and Uber put together have a pool of 4 lakh active cabs in a given week. I am assuming that ET report numbers are for cab rides and doesn’t include auto or bike rides.

Now that we have an estimate for Ola/Uber cabs on the road, what’s the total passenger car sales in India? SIAM publishes domestic vehicles sales trends in India. As per the report, 34 lakh of passenger vehicles were sold in India in FY 2018–19. Assuming that 20% of Ola & Uber fleets are new and one year old, that’s 80k new cabs out of 4 lakh cabs. This means that 2.4% (80k/34 lakh) of new passenger car sales can be attributed to the ride hailing companies.

Clearly, Ola/Uber contribute a very low percentage of new passenger car sales. Some will argue that ride hailing companies do face significant driver churn. Though I would argue that most of the cabs probably get redeployed (by say local taxi companies and hence no more attributable to Ola/Uber) or sold to other potential new Ola/Uber recruits in which case it is not a new car sale. If we still want to account for churns and double this number, ride hailing companies won’t account for more than 5% of new car sales.

Despite being a very niche segment, we do see car manufacturers such as Mahindra interested in working with ride hailing companies such as Ola and Meru. Mahindra e.g. sells 2 lakh passenger vehicles in a year [1]. If Mahindra can get Ola, Uber or Meru cab drivers to buy 20k car a year, that’s 10% of Mahindra’s sales which is not bad at all. Also, they can create a niche by designing cars that matches the needs of cab drivers and ride hailing companies (e.g. Mahindra tied up with Ola to deliver electric vehicles).

So next time if you get stuck in traffic, don’t blame Ola/Uber for adding traffic to the road!