The way commercial vehicles are a dependable barometer for greater economic activity in the country, rickshaw sales represent increased mobility. Despite being a small market, rickshaws carry a strong share of intracity commute and off-road travel in rural areas. That share has recently fallen as folks, especially in urban centers, have turned to motorcycles, cars and ride sharing apps. Perhaps it is for this reason that rickshaw marker Sazgar Engineering is diversifying into the production of cars. But there may be more.
This is not to say, rickshaws are going out of the market. There is a continued lack of reliable and proper public transportation in the country while ride sharing apps which were feared to replace rickshaw travel altogether have incorporated these vehicles within their models. In rural areas, where infrastructure is unconducive to passenger cars, mass transit is absent and income pools do not support expensive car purchasing, rickshaws are integral for mobility. But what about growth?
The auto industry has witnessed a sharp decline in sales over the past two years and rickshaws are no exception—between FY18 (when sales historically peaked) and FY20, three-wheeler sales have fallen 42 percent (Sazgar: down 44%). While some blame could be levied on the poor economic conditions and depleting purchasing power of rickshaw buyers, demand displacement from other vehicle models; mass transit projects in major cities; and higher sales of motorcycles and cars, may be a prominent factor that would have a lasting impact on the rickshaw market, perhaps long after the economy is stabilized.
In FY20, Sazgar’s sales declined 23 percent. Though 80 percent of its revenues come from rickshaw manufacturing, the company also sells wheel rims for tractors and witnessed a revenue decline far lower than volumetric fall. However, high overheads (7% of revenue in FY20; FY19: 6%) brought the bottom-line down three times in just one year. It could have been worse though if the manufacturer depended too much on imported parts due to depreciating rupee but it is highly localized. Revenue per unit sold (estimated using volumetric sales number and does not account for wheel rims) rose 16 percent while the cost per unit sold also grew by the same number. Sazgar has its margins in control.
That however may not be enough, and Sazgar knows it. Just looking at data, even when rickshaw sales were peaking, motorcycles were selling faster and three-wheeler’s share had started to rush south. It was prudent that Sazgar decided to invest in a passenger car plant. Though traditional rickshaws are not going anywhere and will remain a prominent mode of travel, they may not grow substantially like passenger cars and motorcycles are expected to, unless of course, some shake-up is in the cards.
It now seems that shake-up may not be entirely out of reach. One major development here is the government’s plans to support investment in electric rickshaws and motorcycles in the first phase of moving toward electric vehicles. Sazgar is in the thick of that too, having already launched its e-rickshaw hoping to launch battery manufacturing as well. The company is making vehicles that can be converted from their existing motor engine to battery run three-wheelers.
E-rickshaws would certainly revolutionize rickshaws without taking away their essence. The vehicles have cultural significance and it would be a pity if they are wiped out. They also happen to be a source of income for many small households. For the segment to grow, some disruption seems necessary. Green rickshaws may just bring back many commuters who were moving away from three-wheeler travel due to a variety of reasons including ease of travel and safety; and the segment may have its second coming. Here’s wishing rickshaws some luck.