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    Mobility firms Ola, Zoomcar may downsize fleet as rides thin out

    Synopsis

    Zoomcar owns more than 10,000 cars that customers rent on a self-drive basis. A large portion of their fleets has been unused since the beginning of the lockdown.

    Many drivers are expected to dump their vehicles in the used cars market after the government's loan moratoriums end in August and lenders will also repossess vehicles over non-payment of loans.
    MUMBAI/ BENGALURU: Shared mobility companies like Ola and Zoomcar may downsize their fleets, as demand stagnates amid rising cases of Covid-19 infections across the country.

    These companies have approached leading pre-owned car dealers, such as Mahindra First Choice (MFC) and Maruti True Value, to find prospective buyers for their vehicles, multiple people in the know told ET.

    The plan is start unloading a large number of vehicles starting from end of this month, they added. Ola Fleet Technologies has around 30,000 cars which it leases out to drivers on its platform.

    Zoomcar owns more than 10,000 cars that customers rent on a self-drive basis. A large portion of their fleets has been unused since the beginning of the lockdown.

    “Even if Ola has offered financial relief to drivers, at least 50% of them have gone back, leading to a lot of cabs lying idle for months,” a person working at one such yard said, confirming that plans were afoot to sell these cars.

    Mahindra First Choice is evaluating around 60 vehicles from Zoomcar, while Ola is looking at market conditions to figure out the best time to dispose of the vehicles, a person with knowledge of the matter told ET.

    ET could not independently verify the total number of cars that these players could make available on the used cars market as they were still at evaluation stages.

    It could not be verified whether ride hailing company Uber, which has a fairly small leasing business, was also looking to liquidate its fleet. “From time-to-time, we assess market conditions, but we have no official plans (to sell cars) right now,” said Greg Moran, founder and CEO of Zoomcar.

    Ola did not respond to ET’s queries till press time on Thursday.

    A senior industry executive told ET players like Ola were looking to liquidate fleets as their value was quickly depreciating and utilisation was at all-time lows.

    Many drivers are expected to dump their vehicles in the used cars market after the government’s loan moratoriums end in August and lenders will also repossess vehicles over non-payment of loans. This is expected to create more supply, further lowering the value of vehicle fleets, the executive said.

    “It’s my assumption, but I think as many as 25% of all cab drivers in the country are going to sell their vehicles and get out of the business. It’s going to create a huge crisis for lenders,” the person said. “These are yellow-board taxis, so while the overall second hand market might actually do well, consumers are not going to be interested in these vehicles.”

    To overcome an impending loan recovery process, ride-hailing companies may sell cars. A similar process of dumping commercial vehicles had occurred in 2017 when drivers unhappy with the drying up of incentives paid out by Uber and Ola had begun defaulting on vehicle loans. This had forced banks to repossess these vehicles and flood the used cars market to recover costs.

    “Most drivers don’t think it is lucrative enough to come back, and given the seasonality of the pandemic, I see at least 30-40% of drivers not coming back,” said Neeraj Gupta, CEO of Meru Cabs.

    India has about 1.1 million cabs across the ride-hailing, B2B and tourist taxi segments, which collectively amount to almost Rs 30,000 crore in borrowings, he added.

    Mahindra First Choice has been offering yard management services to Ola for over a year, including safekeeping, but it does have any vehicles for sale or auction currently, said Ashutosh Pandey, its chief executive.

    Ola has around 12,000 cars stationed at its yards across the country. Maruti True Value told ET it had not received any used vehicles from Ola for sale. The outlook for cabs, rental services, bikes and auto rickshaws this year looks dim, as corporate travel is down.

    In addition, 80% of the cabs market is concentrated in the top eight cities, where demand is depressed since office-goers are avoiding non-essential travel.

    “Mobility is a primal need, but the options are beginning to change. Because people are not going to work, there is a reduction in that service (ride hailing) requirement. They will need to now change their portfolio of services,” said Vinay Piparsania, Consulting Director at Counterpoint Research.

    It could take up to two years for demand to return to levels seen before the pandemic as growth had slowed to a crawl in this ride hailing business even before the pandemic, experts said.

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    1 Comment on this Story

    Mythili Srinivasan32 days ago
    While Chinese insist their citizen to use bi-cycles for better
    part of life, woos Indians to use Ola and others here. We,
    Indians become obese by eating Pizza,Burger etc. and
    do no physical work-outs. And we use, even for a short
    distance, only motor cycles, caretc. Once famous Atlas
    cycles were banned, after the arrival of Chinease products.
    Chinease over the years,systamatically collapsed our
    life and continue to do so. None from heaven willing to wake
    us up, it is we should get up and look around us.
    The Economic Times