The taxi market has gained prominence over the last 2-3 years, in the backdrop of the entry of app-based aggregators which has not only disrupted the auto-rickshaw and traditional taxi market but also forced automotive OEMs to revise their growth and marketing strategies. A report released by ICRA stated that the Indian passenger vehicle industry is likely to ride on the strong growth potential of the domestic taxi segment in the near term, whereas medium to long term growth will be supported by low car penetration level and increasing income level. “Considering strong demand and increasing penetration of such players in a smaller town, the Indian taxi market is poised for robust double-digit growth over next 2-3 years. In FY2016, fleet sales (including cab aggregators) accounted ~9 percent of Indian PV sales, which is expected to reach 15 per cent-17 percent level by FY2020,” stated the report.
The Indian taxi market is still in the descent stage, with huge scope for growth given the low car penetration level and poor public infrastructure. OEMs have also realized the market potential and have a dedicated sales team to cater to fleet operators. The entry of aggregators like Ola and Uber has changed the competitive dynamics of the taxi market which till now has largely been fragmented and has lacked bargaining power with OEMs with even larger organized fleet operators typically having less than 500 cars. However, the aggregators like Ola and Uber have over 25,000 cabs in the NCR market alone. Consequently, this segment within the PV industry now enjoys significant clout, with some OEMs setting up a dedicated team to address the aggregator market,” observed the report. The rise of the taxi segment however is expected to hit the second car purchase in India in the near term, only in the medium term, the subsequent replacement demand for taxis will offset such a loss.
The taxi market in India is estimated at $9 billion; the organized sector constitutes around 6% revenue share of the overall market. The taxi market in India is highly fragmented and unorganized, The unorganized market is constituted of individual car owners and agencies which operate in one or a few cities, Owned vehicles segment includes pure-play car rental companies (e.g. Zoomcar) and players like Carzonrent and Meru, Aggregators are a new phenomenon driven by the rise of start-ups like Ola & Uber.
First-time car buyers account for 40-45 percent of the Indian car market, and given low car penetration in India, they are likely to remain a potent force. Similarly, the replacement segment is also expected to grow at a robust pace given the shortening replacement cycle of a car in the Indian market. However, the cab aggregator and taxi market pose a real challenge to the additional car buyer segment. Considering that the customer segment already has a car, and can rely on a taxi for short run/limited usage. Given increasing traffic woes, there is also a customer segment which will shift towards taxi usage due to additional comfort of chauffeur driven car without paying out for driver salary. By providing better customer service and registering with the aggregator can make the business so viable.
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