Peers play down M&M's concerns over taxi apps

A day after Anand Mahindra, chairman and managing director of Mahindra & Mahindra, branded taxi-hailing apps such as Ola and Uber the 'biggest threat' to car sales, his peers said the challenge was not that serious.

R C Bhargava, chairman, Maruti Suzuki, said, "I cannot believe that a person will go to a party from Vasant Vihar to Vasant Kunj (in Delhi) in a taxi with his family. He needs to have a car of his own. I cannot see any significant impact to car sales bought by private individuals. People buy not to find the most economical way to get from point A to point B. If that was the case, they would never buy luxury cars. People have various reasons to buy a car; it is an aspirational product."

"In Manhattan, people hail cabs because of dense traffic conditions, but that does not mean people have stopped buying cars in the US. There is still a huge demand," added Bhargava.

Moreover, the huge underlying demand from rural areas gives car makers confidence about a sustained growth trajectory even several years from now. India has one of the lowest car penetration levels in the world among developing countries, with only 17 people owning a car for every 1,000 individuals. In comparison, China has 69 vehicles per 1,000 and US has 786 vehicles per 1,000.

Car makers believe that besides the aspirational value, personal cars offer a level of personal comfort and safety that taxis will always struggle with.

Sumit Sawhney, chief executive and managing director at Renault India, said: "There will always be requirement of a (personal) car in the family. So, the first car will always be there. Maybe the third car in the family gets impacted because of this. More important, this phenomenon is restricted to cities; with improved infrastructure, inter-city travel will only improve, boosting demand for personal cars."

On Thursday, at the launch of TUV3OO, a compact sports utility vehicle, Mahindra had said, "The age of access being offered by taxi-hailing apps like Uber and Ola is the biggest potential threat to the auto industry. Since these apps operators have made transportation a commodity, sales could be hit and volumes impacted."

Mahindra drew concern over the declining trend, especially among the younger lot in cities, about owning cars, while preferring to book taxis on mobile applications for hassle-free intra-city commute. "A lot of youngsters who can own vehicles today don't want to own one, but only need access to transportation," Mahindra had said.

Uber is investing $1 billion in India to ramp up its daily ridership to one million by March, up from about 200,000 at present.