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BW Businessworld

Cars-On-Subscription: Carmakers, Agencies See Big Future In Car-Subscription Market

Covid-19 has further accelerated interest in subscribing to a vehicle with some people becoming wary of ride hailing and sharing services.

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Imagine you are grabbing the keys of your favourite car, without having to buy or own one. How is this possible? This new trend is called carn-on-subscription model. Yes, pay a monthly subscription fees plus a security deposit and drive your favourite car across metros and select cities in India. And after completing a lock-in period of 12 months, one can have the option of continuous usage for maximum 48-months period at a fixed monthly fee (ranging from Rs 15,299 per month for i10 to Rs 32,899 per month for Hyundai Creta and several other brand of cars). One can opt-out anytime between the 6th to 48th month (monthly fees also stops henceforth). 

Going by the high subscription cost (on a monthly, half-yearly or annual basis), this service is not for everyone but those who can afford to shell out a big amount just to stay away from the hassle of car ownership and the subsequent insurance, maintenance and servicing cost that comes bundled along with any owned vehicle.  

In 2020, due to the spread of Covid-19 the cars-on-subscription services have seen accelerated interest among a select section of consumers as people became wary of ride hailing and sharing services due to safety concerns, these companies claim.

Puneet Gupta from HIS Markit feels that Covid19 has added to the uncertainties in terms of jobs and in terms of business. He is of the firm view that consumers may be looking forward to de-risk themselves and minimize their liabilities. “Subscription may thus be the area of thrust for all car manufacturers and also the choice for consumers. It’s as commitment is far lesser and its convenient to own a mobility carrier,” reveals Gupta.

Hyundai Motor India, which was the first carmaker to get into this route, has shown a growth of 54% in Calendar year 2020 on a YOY basis. The company maintained that the top 3 subscribed models are – Santro, Creta & i20 with customers preferring to subscribe for monthly plans. A company official, who did not wish to be quoted, maintained that nearly 70% of the numbers garnered through this model till date are during Post Covid era.

Mahindra and Mahindra (M&M) is another player which is betting on this vertical very aggressively. Veejay Nakra, CEO – Automotive Division, M&M, while e-interacting with BW Businessworld recently stated, “Subscription is the sweet spot between leasing and ownership and we are very happy that we were the first in the country to launch this model. For Rs. 25,000-30,000 a month, you get to use an (Mahindra) XUV 300 which includes your service and maintenance (costs). Insurance monthly service paid for in the monthly payout of Rs 25,000-30,000. When income stabilises, you want to continue to own the XUV 300, we simply transfer the asset in the name of the customer and then it moves from subscription to ownership.”

Seconding his thoughts, Shashank Srivastava, Executive Director, Marketing and Sales, Maruti Suzuki India maintains, “Subscription offers to consumers a new way of asset light usage of cars. Traditionally, cars could be bought on cash or finance but lately there is a trend whereby some consumers want to just pay a monthly charge for car usage. So far we have almost 12,000 such cases in pipeline and hope to expand the scheme from the current 8 cities to 20 by next quarter and to the other cities subsequently.”

Similarly, Tata Motors introduced the subscription model for the Nexon EV. “Through this medium, our overarching goal is to address the consumer that prefers the idea of ‘usership’ over ‘ownership’ for the Nexon EV, thereby expanding our overall customer base,“ reveals Pankaj Jhunja, Head- Mobility Services, Tata Motors.

With car cos are chalking out multiple strategies to augment its presence in the ownership space, mobility firms are also upping its ante in the subscription space.

For Revv, country’s fastest growing self-drive car rental service, car subscriptions constitute more than half of its business and the company has served more than 8,000 subscribers so far. “More than 75% of the 8000 subscriptions happened after the lockdowns. There is a clear and massive shift underway towards personal mobility. The Covid crisis and its aftermath has dramatically expanded the awareness and relevance of subscriptions. We are targeting 15-20K subscribers during 2021, affirmed one of the founders of Revv.

Another company Myles see bright future for the car subscription services in next three years. Sakshi Vij, Founder & CEO: Myles avers, “In the post COVID-19 world, we have seen an increasing demand for dedicated cars but also a huge need for affordability in owning cars. Our business has grown by 67% since April last year. We have exceeded our pre-COVID subscription requests on a month-on-month basis. We are also expecting a significantly higher increase in subscription requests in the next quarter of the financial year.”