India: radio taxis to be savior of car makers
Published:31-December-2008
By Manish Khurana
Car makers in India are struggling due to a slump in car sales caused by the on-going financial meltdown. However, the growing radio taxis segment in India, which is expected to be a stable revenue stream for at least the next three to five years due to upcoming sporting events in the country, provides manufacturers with an alternative sales channel.
Growing demand for radio taxis in India provides auto makers with an alternative revenue stream.
Domestic passenger vehicle sales in India fell to 98,900 units in October from 105,877 units in the same month in the preceding year. At a time when sales in India's passenger car market have been assaulted by the global economic slowdown, the growing radio taxis segment provides an alternative sales channel for the car makers present in the country. In India, radio taxis are those that are run by private companies and must be booked in advance, thus forming part of a more organized transportation system than single taxis that can be owned by individuals and flagged down on the street.
Radio taxi service is currently more pronounced in the major metros of the country. The service is also observing a growing demand for better quality of service, especially with respect to billing in tier II cities. Thus, radio taxi companies are now looking to expand their operations and have placed bulk orders with the various car manufacturers in the country. Easy Cabs is believed to have placed an order for 700 Logans and 200 cars each with Tata Motors and Maruti Suzuki. Meru Cabs and Quick Cabs are also expanding their fleet size by 500 vehicles each.
Indeed, the growth in the radio taxis segment would provide a stable revenue stream for these car manufacturers for at least the next three to five years. The main drivers of this growth in demand will be the expansion of the tourism sector due to two major sports events that India is slated to host in the near future. India is hosting the Commonwealth Games in 2010 and is one of the hosting nations of the Cricket World Cup in 2011.
Car manufacturers in India would like to take this opportunity to solve two main issues. First, to push the sales of their not so popular car models to radio taxi companies. For instance, Mahindra-Renault's Logan failed to attract the expected number of customers, but was then adopted by radio taxi companies including Meru Cabs. Second, and more importantly, manufacturers can hope that by catering to the growing radio taxi segment they will be able to offset the decline in their passenger car sales.
