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COVID-19: Driving new shifts in India’s ride hailing ecosystem

• Cities all over the globe were in the midst of a mobility renaissance as new forms of shared mobility became the lifelines of transportation networks of bustling cities. 

• However, the onset of COVID-19 pandemic has jeopardized the sector’s performance in India, like the rest of the world, and might have a disruptive impact on its future. 

• Research reveals that respondents have developed a fear of travelling in public transport and showed a preference for their private vehicles for commuting.

• In this kind of a scenario, shared mobility providers should focus on building consumer confidence as well as device strategies for cost optimisation. Besides this, they need to be cognisant of ways in which the pandemic could impact consumer behaviour dynamics.

Only a couple of months back, cities all over the globe were in the midst of a mobility renaissance as new forms of shared mobility became the lifelines of transportation networks of bustling cities. With the steady increase in urbanization, rising population of millennials, and government initiatives, the popularity of ride sharing and ride hailing apps such as Ola and Uber surged in the country.

Within a short span of time, these commuting apps emerged as convenient & eco-friendly solutions for urban travel, thereby augmenting overburdened public transport systems in smart cities. In fact, a study by Frost & Sullivan, Strategic Assessment of Shared Mobility Market in India, 2019, estimated that the market for shared mobility services in India could grow at a CAGR of 9.7% between 2019 and 2025 to reach US$ 4.7 million. It also adds that total revenue from ride-hailing services is valued at US$ 22.4 billion, and is likely to grow at a CAGR of 13.7% over the 2019-25 period.

COVID-19: Sabotaging shared mobility in urban transit systems?

The onset of COVID-19 pandemic has jeopardized the sector’s performance in India, like the rest of the world, and might meddle with its promising future. When lockdowns halted the normal fast-paced everyday life in a bid to contain the spread of the virus, commuting and leisure trips for millions of people came to an abrupt halt. One of the consequences of people being placed under a quarantine at home was that urban transportation usage was not only disrupted, but it plummeted to its lowest level in decades.

The International Energy Agency, for instance, observes in the case of China that during lockdown, shared micromobility use plunged to near zero and operators reduced or suspended services. As Uber’s rides business fell by 80% in India, it fired 600 employees in the country. Similarly, Uber’s main rival Ola also sacked 1,400 employees as its revenue took a hit amid lockdown. Ola CEO Bhavish Agarwal said, “Our revenue has come down 95 per cent over the past 2 months. Most importantly, this crisis has affected the livelihoods of millions of our drivers and their families across India and our international geographies.”

Post-lockdown trends in urban mobility

Slowly and steadily, however, different states and cities are exiting lockdowns and economic activities are resuming. As people across the country return to work and the lull in road traffic is beginning to fade, there is an attitude shift in consumer behavior. Now with the government propagating social distancing guidelines in order to avoid coming in touch with the virus, there is an understanding that there needs to be more space around a person, whether at work or while commuting. Further, what adds to the complexity of this situation is the shrinking disposable income as millions in the country lose their jobs or suffer pay cuts. In this kind of a scenario, questions arise on the future of mobility as a service and what trends will develop in urban mobility in a post pandemic scenario.

According to a survey of major cities in the US, China and Western Europe (France, Germany, Italy, Spain, and the UK), the travel modes perceived as riskiest were those offering little physical distance from fellow passengers. It observed that 40-60% of respondents in all three regions said they will be using public transit less or much less frequently, in favor of walking, biking or driving their own car. Other shared-mobility modes, such as ride hailing and cab sharing, will also be used less often than before. However, it notes that they won’t experience as sharp declines.

The study added that as more people resume their daily commute and regular routines, cost could resume its place as their top priority criteria in terms of travelling. Another interesting trend that this research revealed was that more than 60% of Chinese respondents were more likely to buy a car post-lockdown than they were before the crisis. This high demand was attributed to relatively low car ownership in China as compared to other regions; for many, a car is an aspirational purchase. It concluded that public transit and shared mobility could make a comeback, as the crisis dissipates, their safety concerns won’t be nearly as acute.

Studies show that India reverberates the same sentiment. A recent report by TERI titled Impact of COVID-19 on Urban Mobility in India indicates that the urban transportation landscape is likely to undergo significant changes due to the pandemic. About 35% of respondents expressed that they are likely to change their mode of transport for work trips post COVID-19. “A sharp decrease has been reported in the usage of bus and metro services, and instances of shared mobility have dropped as well. This is expected to shift to the use of private vehicles and intermediate public transport (IPT) such as taxis and autorickshaws. Share of non-motorized modes may also increase, especially for short distance trips,” it observes.

 

 

 

Further, findings from the recent Deloitte Global State of the Consumer Tracker Survey reveal that with the fear of using public transportation (82%) or ride-hailing services (75%), the intent of respondents to buy their next vehicle online has seen an upswing. Also, around 87% of the Indian respondents expressed a positive sentiment towards vehicle ownership, while 79% people in Indian would like to retain their current vehicles longer than originally expected.

Rethinking India’s urban transport

Studies suggest that in the long run as the number of COVID-19 casualties decline and lockdowns are eased, the need for social distancing is likely to decrease and shared mobility will become popular again. However, until that time comes, building consumer confidence by ensuring the health of staff and passengers will be the key to stimulate demand for ride sharing apps. Sanitizing cabs and providing protective equipment to drivers have already been introduced by ride sharing apps in the country for this reason.

COVID-19 has added a new dimension to the application of futuristic technologies like AI/ML and IoT – ensuring ride safety. Examples include a face recognition based selfie authentication mechanism to ensure that drivers are wearing masks and routing of cabs is being done to avoid containment zones. AI is being utilised to estimate risk of contamination of a vehicle or its occupants real time based on routes, risk profile of the passenger through integration with Aarogya Setu app, etc. Further, it can suggest vehicle cleaning or fumigation schedules to help minimise the risk.

Introducing discounts on cab services, improving the efficiency of services and promoting card and digital payments would be crucial in mobilizing customers. Another strategy will be focusing on streamlining operations and optimizing costs to curb cash burn. This could be done through adopting tactics like zeroing in on the most profitable cities where these services could be provided. Providers should also consider alternative pricing schemes, such as monthly passes to urban travellers.

The country also needs to prepare for the eventual transition towards sustainable mobility options. As studies suggest, a significant chunk of people in the country will commute by their private vehicles like cars, scooters, bicycles and bikes. Cities like Mexico City, Lima, Berlin, London, Wuhan, Milan, Paris and New Zealand offer many examples of how urban mobility is being rethought with the swift rollout of walking and cycling infrastructure at less costs.

In India, some companies have already started moving towards such business models. While Uber launched grocery delivery to cover up for COVID losses, Ola has intensified its efforts towards electric mobility. After acquiring Amsterdam-based electric scooter maker Etergo, it has announced that it will soon announce an electric scooter for global markets.

On long-term trends, Mckinsey projects a rise in 2-wheeler and 3-wheeler transportation. The former could be driven by the increased preference for affordable and safe mobility, particularly considering the large movement of migrants back to their home towns. 3-wheelers may be popular as personal taxis are considered a safer option than shared mobility. Prospects look positive in particular for small format EVs, due to lower total cost of ownership compared to ICE options and ease of charging.

Within shared  mobility, there is a positive trend for 2W mobility, driven by last-mile delivery of food, grocery and e-commerce. Ride hailing and self-driving rentals are also lucrative, with YoY growth of 40-50% and 100%, respectively, through 2025. For 3W vehicles, passenger mobility will lead growth with a CAGR of 40-50%, followed by goods delivery, with CAGR of 14-16%. Managing the short term disruption, building consumer confidence with safe and affordable transportation, and keeping an eye on such paradigm shifts will be key success factors for ride hailing/sharing companies in the post-pandemic phase.

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