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Do Ola and Uber look accountable for the trouble in the auto sector?

Saturday - September 14, 2019 12:20 pm , Category : WTN SPECIAL
Ola-Uber being held responsible for the slowdown in the auto sector!
Ola-Uber being held responsible for the slowdown in the auto sector!

'Comparative' analysis of the Ola-Uber theory of Finance Minister

SEP 14 (WTN) - The global economic slowdown has had the first and largest impact on the automobile sector in India. For the past one year, there has been a slowdown in this sector. Due to low vehicle sales, automobile companies have had to reduce production. The downturn in the auto sector has had an impact on other industries and services related to it, causing thousands of people had to lose their jobs.

Opposition is an attacker on the Modi Government on the condition of the auto sector deteriorating continuously due to the recession. At the same time, auto sector companies are blaming the policies of the government for this terrible recession. Amidst all the accusations over the continuing slowdown in the auto sector, a statement by Finance Minister Nirmala Sitharaman has given a new direction to the debate. Finance Minister Nirmala Sitharaman has said that taxi aggregators like Ola and Uber are responsible for the slowdown in the auto sector!

In support of her statement, the Finance Minister has said that the thinking of the youth is gradually changing. Now, instead of buying their own vehicle and filling their EMI, youth are giving more preference to booking taxis like Ola and Uber. After this statement by the Finance Minister, the Opposition has targeted the government fiercely and said that the government had failed to deal with the recession. On the statement of the Finance Minister, the auto sector says that the claim of the Finance Minister is far from true.

Discussions are continuing on the statement made by Finance Minister Nirmala Sitharaman behind the slowdown in the auto sector. Does it cost less to hire Ola and Uber than to buy a new car? Are the youth increasing their savings by doing so? On the same issue, Financial Express has done a comparative study between the expenditure incurred on buying a new car and its expenditure on maintenance and hiring of Ola-Uber.

According to the case study of Financial Express, if a person buys a normal car, the cost will be around 6 lakh rupees. After 6 years, the scrap value of the car will be around 1 lakh rupees, that is, in 6 years the net expenditure on buying the car will be 5 lakh rupees. That is, it costs Rs 230 per day to buy a car according to 2200 days of 6 years.

The annual amount of insurance on a car is Rs 15,000, that is, Rs 41 is spent on insurance every day. If the car is run normally, then there will be a fuel expenditure of about 150 rupees on the car every day. At the same time, after three years, the cost of changing tires and batteries will be around Rs 25,000 i.e. the cost of one day is about Rs 23.

If you have bought a car, then its maintenance is also important. In such a case, the annual maintenance of a car is about 9,000 rupees, that is, the daily expenditure of 25 rupees. At the same time, if the interest loss is calculated, then it is close to Rs 131 every day. If all these expenses are added, then the daily expenditure on buying a new car is about 850 rupees, which may be slightly less or much more.

According to the study, in the case of a car, the cost of petrol or diesel is shown at Rs 150 per day. That is, according to this the car is running 25 to 30 kilometers daily. Now let's talk about the expenses incurred on hiring Ola or Uber. The Flexi Fair fare for a journey of up to 15 kilometers is 170 to 215 rupees for hiring Ola or Uber. The fare for the 30 km journey will be between 340 and 430 rupees. In the average, it can be considered as a daily expenditure of Rs 450.

That is, where the purchase and use of the car is going to cost Rs 850 every day, while using Ola or Uber, the same is being spent on Rs 450 per day. This means that according to this calculation, there is a saving of at least 400 rupees every day in taking a rental taxi compared of buying a car.

Let us now analyze this case study. Actually, it has been seen that in this era of inflation, expenses have increased considerably. In such a situation, the sensible middle class and youth generation do not want to increase the expenses further. In such a situation, people are finding more benefit to ride by taxi instead of buying a new car. Also, traveling in a taxi gives one a feeling of safety, while people get relied from traffic rules and parking problems also. The savings that are being made in this way, people are using it for future planning.

At the same time, let us assume that due to savings, the youth and middle class are giving more preference to taxi than car. But such culture is currently only in the metro cities. The car craze has not reduced even in small cities, towns and villages. The car is still considered a status symbol in these areas. If we study the last few years, then it is clear that the sales of cars are more in small cities, towns and rural areas than in the metro cities.

At the same time, car has become a need rather than luxury. In such a situation, Ola-Uber theory can be said to be limited to metro cities only. At the same time, the sale of two-wheelers has also been affected due to the recession, in such a situation, Ola-Uber theory does not work here.

After the Finance Minister's statement, people associated with the auto sector have also said in their response that the Ola-Uber theory has nothing to do with the auto sector slowdown. Admittedly, the use of Ola-Uber services in the youth population has increased, but it is not right to consider it as a solid reason for the recession, rather than that, the real reasons for the recession must be discovered. According to the people associated with the auto sector, the perception about buying a car in India is still remained unchanged. People in India buy cars to meet their needs and hobbies.

Finance Minister Nirmala Sitharaman's Ola-Uber theory can’t be completely ruled out for the slowdown of the auto sector in the country for the last one year, whereas the same theory can’t be held responsible for the recession. There are many reasons which are responsible for the slowdown in the auto sector, however, experts say that the auto sector would have to face recession from time to time, but it is never permanent. While the government will have to take some measures to overcome the ongoing slowdown in the auto sector, as well as the auto sector should also focus more on increasing sales, leaving worries.