The way we own cars is changing. Thanks to rising fuel prices, taxation, poor infrastructure and other factors, Indians are avoiding long-term car ownership. Instead, many are signing up for car subscriptions.
All one needs to do is to sign up online, provide salary statements, and within a week, the car is ready to be driven home. But how different is it from renting a car, and what other advantages does it offer?
Netflix for cars
A car subscription service is a lot like Netflix. Using these platforms, you can watch your favourite show without even owning a TV set. Likewise, a car subscription allows you to effectively ‘own’ a car without any of the hassles of registration, servicing, taxes, etc, all of which are paid for. Additionally, you can also swap your car out for a different one the following month. And, if you’re relocating to a different city, you can restart the service once you have moved.
You also don’t have to worry about reselling the car since in most cases your car goes back to the subscription provider at the end of the tenure – which is anywhere between one and 72 months. You’re also given a white number plate, the same as that of a car owner instead of the black-and-yellow one typical of a rental. Servicing, as mentioned above, is taken care of. There’s doorstep pick-up and drop every time your car is due for a service. A car subscription, therefore, effectively does away with all the stresses of car ownership.
Car ownership costs
With the average down payment of nearly Rs2 lakh that most car dealers require, it’s quite a challenge to bring a new car on-road. Several months of precious savings could get wiped out. Keep in mind that the Rs2 lakh is just the down payment. The remainder of the vehicle cost (Rs 6-7 lakh on average) is typically covered through a vehicle loan. For the average Indian, this is a hefty obligation and usually comes at a very high interest rate. Moreover, many of these loans have hidden fees that really hit the wallet.
For starters, there is no down payment in a subscription. It’s effectively a lease, except the leasing market in India is practically non-existent. From a personal working capital perspective, it’s hard to match the allure of zero down subscription structure. To reserve a vehicle on subscription, it typically requires a refundable deposit of just Rs10,000-15,000 which is promptly returned at the end of the subscription period. Most subscription providers also have apps that offer discounts and referral bonuses, which can bring down costs by a further 70 per cent.
Sujit is a Kochi-based businessman who keeps travelling to Mumbai, Pune and Bengaluru. Since he doesn’t own a car, he prefers to rent one every time he lands in one of the three cities. He always chooses Zoomcar over others because of the excellent customer support. “There was this one instance where my steering had jammed, and I was in the middle of nowhere, en route to a client in Pune from Mumbai. All I had to do was call up my Zoomcar executive and they took care of everything,” he said.
“Interestingly, 90 per cent of Zoomcar subscribers are non-intenders,” says Zoomcar CEO and co-founder Greg Moran. “They never thought of owning a car. But due to the compelling features of the Zoomcar subscription platform, like zero down payment, no car loan, no maintenance cost, and no insurance cost, suddenly having a car is no longer a financially crumbling option.”
Your choices
Zoomcar is the oldest in the business and currently has a 90 per cent share in the rental car business. They recently hit 15,000 subscriptions after entering the market in 2018. The company is currently operating in 35 cities and recently raised Rs213 crore in an investment round led by Sony’s Innovation Fund. Zoomcar, as of 2020, has a 10,000-strong fleet, which comprises both rentals and subscription-only models.
There are others like Myles and Revv, but the biggest change we’re seeing right now is the entry of carmakers like Maruti, Hyundai, Mahindra, and Toyota. Car subscriptions make a lot of sense for car manufacturers because they save on dealerships and other marketing overheads. Plus, since subscribers no longer have to worry about selling their used cars and are assured of a robust service network, it frees up a lot of demand across all product verticals.
The best thing about opting for an OEM-backed programme is the promise of a new car. While car subscription services like Zoomcar, Myles and Revv charge extra for a new car, OEM-backed plans include fresh-off-the-lot cars. A non-OEM subscription provider may charge less for the same car, but it won’t be a new one. Generally, cars between one and three years old are put up for a subscription in the case of companies like Revv or Myles, and others. On the other hand, cars that are more than five years old are either sold back to the manufacturers or to private fleet operators. Sometimes, they also end up in the grey market.
Unfortunately, OEMs do not have the market penetration that car subscription companies and start-ups enjoy, which is why many are joining hands. Hyundai, for example, has tied up with Revv, while Toyota has tied up with Myles. Maruti’s Subscribe, on the other hand, is powered by tech powerhouse Orix Automation. Working with carmakers allows subscription companies to get financing deals that are otherwise off-limits to new car buyers.
A typical subscription will set you back by Rs15,000 for a hatchback. Every subscription plan has some form of a kilometre-based cap, and exceeding that will attract an additional charge. The monthly driving distance varies from 1,000-2,500 km, depending on the plan. Among the OEMs, Hyundai offers a 2,500 km cap, for instance, while MyChoize, a non-OEM start-up, is the only one that doesn’t have a limit on the monthly driven distance. If you’re looking to drive an electric vehicle, you can choose between Revv, which has the MG ZS Electric Vehicle, or Tata, which offers the Nexon
Electric Vehicle
Now, what if your car could earn back all the money you spend on the subscription? Zoomcar allows users to share subscribed cars, as part of their ZAP programme. Users have reported earning back up to 70 per cent of the monthly subscription fees through Zoomcar’s shared mobility options. The only challenge is that the car is registered as a rental and not a privately-owned vehicle.
Although India Inc built more than 27 million cars in 2019-20, barely 1 per cent is owned by rental and subscription businesses like Zoomcar, Myles, and Revv. But soon, that figure is going to rise quickly, because of the innate advantages of the subscription model. Almost 70 per cent of Indian millennials have signed up for one.
A car subscription is a viable car ownership option that comes with its challenges. You can’t, for example, drive beyond the monthly limit without incurring additional charges. Many companies will not allow you to customise your car. In most cases, you also get the bargain-basement model with the least interior and accessory options. But, considering the flexibility that comes with a car subscription, it may very well be the only way we’ll own cars in the future.
What industry leaders say
Naveen Soni, Senior Vice President, Sales, and Service, TKM, said: “Customers are choosing the subscription service as it offers a hassle-free experience and greater convenience. There is a higher aspiration to experience the Toyota Fortuner and Innova Crysta through subscription as well as leasing. We are witnessing good traction for the Glanza too from younger customers.”
According to MSIL Executive Director (Marketing and Sales) Shashank Srivastava: “The vehicle subscription market is new to India and as such offers huge untapped potential. Globally, the penetration of such leasing programmes varies between 5 per cent and 30 per cent. The comprehensive Maruti Suzuki Subscribe initiative offers customers multiple advantages and peace of mind from the headache of maintenance costs and insurance renewal.
Besides the flexibility of tenure, it offers nil down-payment and includes registration costs, insurance, and renewal as well as routine maintenance. Additionally, the roadside assistance service brings total peace of mind to customers. Progressively we aim to offer Maruti Suzuki Subscribe in 40-60 cities in the next two-three years.”
Says Greg Moran, CEO, and Co-Founder of Zoomcar: “There is an exponential spike in demand expected for car subscriptions. Considering the current recession, car subscriptions can prove to be a better option than ride-hailing and also a more affordable and quicker way of acquiring a car, delivering a safe personal mobility replacement. The last couple of months have been quite a wild ride for everyone and particularly for those in the mobility sector! In the last few weeks of May, we began to gradually build up operations and saw bookings and subscriptions come back strongly. We are already seeing a 400 per cent rise in demand and we expect this to settle down at 200-300 per cent over the next few months.”