News and Trends
Subscription-based Models In the Rental Car Industry Becoming a Trend
With the COVID-19 scare continuing to hover over the world, one thing is certain-social distancing has become a part of our lives and will remain so for months to come. Our choice of mobility and transportation is no exception and should be such that they involve minimal physical contact. The question of using public transport is out of the window for most of us. But what if one doesn't own a car? Purchasing a brand-new car may not be a feasible solution for all, especially during such testing times.
In terms of privacy, flexibility, and most importantly, hygiene, private transportation is indeed the better mode. However, considering the economic slowdown owing to the pandemic, buying a car, and locking down finances for three to five years might not prove to be a smart choice. This is where rental cars come into the picture. With the market size projected to grow at a CAGR of 15-20%, car rentals have turned out to be a lucrative market in India.
In fact, rental cars might even be safer in today's world with brands ensuring stringent hygiene and safety measures with the help of innovative technology. They have also come up with subscription-based models that are affordable, convenient, and safe. Especially considering the current recession, car subscriptions can prove to be a better option than ride-hailing and as a more affordable and quicker way of acquiring a car, delivering a safe personal mobility replacement. Subscription-based car rentals are now swiftly gaining traction with a significant percentage of people opting for them. Let us look at how subscription-based models are becoming a go-to option for the masses.
Car subscription gaining popularity
Car ownership in India is still considered a status symbol. However, with related problems attached to this ownership such as inadequate parking space, volatility in fuel prices, insurance premiums, etc., people are putting off their car-buying decisions. Furthermore, the pandemic has resulted in countless job losses, adding to people's woes, and making it nearly impossible to purchase a car. Thus, the practice of buying or owning a car is fast being replaced by subscribing a vehicle for personal use, resulting in the automobile industry witnessing a shift in consumer behaviour.
According to the Automotive Subscription Services 2020 Global Market Report, the global automotive subscription services market is poised to grow by $9.15 billion between 2020 and 2024, progressing at a CAGR of 64 per cent during the forecast period. With lockdown guidelines gradually being relaxed and offices resuming operations, car rental and subscription companies are seeing an exponential spike in demand for their services.
The shift towards subscription models
Car subscription is defined as a service where a customer pays a recurring fee for the right to use one or more automotive vehicles. To start with, the lock-in period is much shorter and prices are reasonable. Although the concept of subscribing a car is not new, it has only recently become immensely popular, particularly among the urban millennial population.
The needle has shifted from owning to experiencing, and subscribing a car makes the experience hassle-free. Car subscriptions are also suitable for those who like to experiment and prefer variety rather than sticking with one car for long periods of time. Apart from this, subscription models are convenient for those in transferable jobs, which eliminates the need to transport their car from one place to another as they move.
Leveraging technology for a seamless experience
One of the key reasons for subscription-based models is that brands are using new-age technologies to make the experience seamless for customers. Powered by artificial intelligence and machine learning algorithms, car rental brands are leveraging best-in-class technology to ensure the safety of customers. From thorough sanitization and keyless entry systems, companies are putting best practices of safety and hygiene at the top, undoubtedly with assistance from technology.
We are seeing winds of change blowing through India's automobile industry, especially in the car rental sector. Whether car subscriptions will be more popular than car sales, will be an everlasting debate, as the two can't be compared. But, considering the rate at which car subscription models are being adopted, it infuses new dynamics into the way Indian customers view shared mobility and owning a vehicle. The car rental industry and subscription model are well on their way to disrupt the existing norms and their future certainly appears promising.