Do you really need a car when all you need to do is book an app-based cab?

Ekta Shailendra, an employee of an auto company in New Delhi, sold her car recently. Once she shifted to the taxi aggregators, her vehicle remained unutilised. “I have hardly used it in the past six months but spend on servicing and parking,” says Shailendra. And then, there are some like Samir Sharma, who simply refuse to buy one. The argument is the same. “I can always hire a car. So why to spend money on buying and going through headaches and deadlines like obtaining pollution under control certificate and buying insurance on time,” says Sharma.   

The app-based taxi services have also responded quite well. In recent times, they have been bringing down the cost of travel. With the introduction of the ‘Ride Pass’ programme recently, using Ola and Uber can turn out to be more economical than ever before.

These taxi aggregators have capped fares at lower rates based on distance travelled. If an individual travels up to seven kilometres in Mumbai, for example, he pays a flat fare of Rs 145 for using a micro-segment car. For up to 12 km, the fare is as low as Rs 205, and for up to 20 km it is Rs 305. “As cab utilisation grows, we can make the trip more economical for customers,” says Rahul Maroli, vice president–rental and corporate distribution at Ola. Uber also has a similar offer starting with a flat fare of Rs 139.

Car ownership is expensive: Ola and Uber are now part of daily life like the auto rickshaw and black and yellow taxis, at least in major metros. And, it’s for a good reason. For most individuals, using app-based taxis is cheaper than owning a car.

If a person travels up to 50 km in a day, owning a car turns out to be more expensive even if it’s self-driven. Add the cost of a chauffeur, and it can be three times more expensive if you travel up to 20 km in a day, according to data crunched by EY. It’s more affordable even if you take a trip on a surge price of 1.3 times of the usual fare. The total cost of ownership of a car includes the interest cost that a person pays on the auto loan, paying for fuel and maintenance, insurance, parking, and replacing the car after a few years.

The money you save, if invested properly, can earn substantial returns. Say, the saving is Rs 300 a day between an Ola or Uber and your car. That means a monthly saving of Rs 9,000. If you start a monthly systematic investment plan in a mutual fund with this amount, assuming a return of 12 per cent a year, the total amount in your hand after five years will be Rs 742,000 – enough to buy a top-end Maruti Suzuki Swift or even a Honda Amaze.

If you travel between 50 km and 100 km a day, then the balance shifts in favour of owning a car. A self-driven car turns out to be cheaper than taking an app-based taxi. But if you have a chauffeur, it’s slightly more expensive. “Ride hailing services are economical by approximately 67 per cent compared to a self-owned car for short distance of 20 km. For a distance of 50 km, it’s cheaper by 39 per cent. The lesser the kilometres clocked in a day while travelling, the more sense it makes to shift to a ride-hailing service like Ola and Uber, considering the factors like the cost of owning a car, the replacement cycle, fuel cost, maintenance and salary paid to a driver,” says Rakesh Batra, Partner and Automotive sector leader, EY India.

Further lowering the costs: The overall cost of travel can further reduce if a person opts for sharing the taxi. These app-based taxis have recently introduced ‘Ride Pass’ for ride sharing, too. Ola charges a flat fare of Rs 209 for up to 24 km for a shared rise and Rs 305 for up to 20 km if a person books the entire cab for himself. “A minuscule percentage of car owners drive long distances (75-100 km) every day. Even for them, the fatigue of driving on their own for such long distance makes using the cab service more attractive. Moreover, over time we would see that concepts like ridesharing and carpooling making even the daily long-distance travel cheaper than owning a car,” says Nilesh Sangoi, CEO, Meru.

But ride-sharing is more time consuming as the cab has to pick up and drop multiple customers. That’s why many prefer to book the cab entirely on their own instead of pooling the ride. “The ride-sharing segment sits between a customer booking an entire taxi for himself and travelling by road using public transport. It’s more time consuming than travelling alone but faster than public transport,” says Maroli.

Should you postpone car buying? App-based taxi companies say that as they introduced newer segments, more and more individuals are postponing the decision to buy a car. According to them, owning a car is not the top priority as it used to be. Those in their twenties now postpone buying their first car, and those over thirties are delaying their second car purchase. Both these consumer segments are relying more on app-based taxis.

To replicate an ownership-like experience, these companies are also giving cars on rent based on hourly packages. It is a premium service meant to target consumers who prefer to travel in their car over the weekend and also those who like convenience over cost. There’s also the outstation services now that target weekend travellers. “It’s not the entirely the cost of travel that people have shifted to the app-based taxis. It’s also because of traffic conditions. Individuals don’t want the stress of driving in congestion. With a chauffeur, the travellers focus on other important things,” says Ashish Verma, assistant professor, department of civil engineering, Indian Institute of Science.