Recently, when asked about the auto crisis and why is it happening, our Finance Minister, Nirmala Sitharaman, claimed that along with the BS6 being implemented, the mindset of millennials is to blame for the automobile industry facing the slump that it is.
She said that two years ago, the automobile industry had good times and because of several external factors, the industry is now going through a slowdown. One of the factors according to her, being the preference of millennials towards the services of companies like Ola and Uber, instead of buying new cars.
“Automobile industry is now affected by BS6 and the mindsets of millennials, who now prefer to have Ola or Uber rather than committing to buying an automobile,” said Nirmala Sitharaman, Finance Minister.
In the light of this state, let us look at the facts to see if the millennial preference is affecting the auto sector in the way our Finance Minister believes that it is. To understand that, we need to first look at who are classified under the millennial category. Those between the years 1981 to 1996 fall within this category. So, most of these millennials are in the working-age group and make up the financially independent category in our economy. Hence, how this group spends its money and its consumer preferences does affect the way the economy functions. So, if these young people are buying fewer cars and houses, does it automatically prove that they don’t want to buy these consumer products or does it prove that they cannot afford to buy them because of other underlying factors?
The data supports the latter story. For instance, government data shows that as many as 33% of India’s skilled youth between the ages of 15 to 29 are unemployed. So, there is no question of buying cars when one is unemployed. But what about the ones that have jobs and are employed in the private sector. But even for those who are employed their appraisals have been the worst in the year 2018-2019 since 2009-2010. So, without good appraisals, one wouldn’t think about getting themselves into another liability by buying a car.
This was only one part of the story. As per Sitharaman’s statement, if the auto industry is experiencing a slowdown because millennials are using the services of Ola and Uber, then we should definitely be able to see a rise in its number of daily rides. However, the statistics show us a completely different story. According to a report in Economic Times, the number of daily rides increased by only 4% in the past six months. In comparison to this, the growth rate of daily rides of Ola and Uber combined were 20% in 2018, 57% in 2017 and 20 % in 2016. This shows that millennials are not just buying fewer cars, but are spending less overall due to the crunch in the job market.
Indeed, Ola and Uber might themselves be very well slowing down. Data points to the fact that commercial vehicle registrations are declining. For instance, in Maharashtra, the number of commercial vehicles that were registered for the year 2018-2019 was 25,000. Which is a far cry when compared to the 66,000 cabs registered in 2017-2018.
This is not all. Apart from passenger four-wheelers, the number of purchases for trucks, tractors and two-wheelers have come down. The first two in this list are not used by millennials and two-wheelers are majorly an indicator of how well the village economy is doing. The decline in tractor sales has been seen despite a normal monsoon this year and a decline in two-wheeler sales show how much the rural economy in India is ailing.
So, to answer the question if the millennials are really at fault for the auto slump, our verdict is a huge No!