Self-driven car rentals gaining speed in India

In millennial India, the concept of purchasing a car has taken a back seat and renting, or sharing is the new normal. With more and more organized players entering the self-driven car rental market, this sector is expected to generate a revenue of around US$338 million in 2019

December 19, 2018

A cultural shift from looking at car ownership as a symbol of luxury and status to an utility-based service has contributed to the growth of self-driven car rental across India

Myles, Zoomcar, Eco Rent a Car, Avis, Drivezy, Kayak and Carzonrent are just some of the players in the barely five-year-old industry that has drawn innovation and investment

Leveraging strengths in data, technology, connectivity and entrepreneurship, the self-drive car rental and shared mobility market in India is encashing on the new opportunities

India is expected to become the world’s third-largest passenger vehicle market by 2021; the annual cost of traffic congestion is estimated to be US$21.3 billion for the four Indian metros

India is expected to emerge as the world’s third-largest passenger vehicle market by 2021. The auto sector had become the fourth-largest with sales of more than 4 million vehicles, excluding two wheelers, in 2017. Now, according to a report by McKinsey & Co, a US-based consultancy firm, with over 500 million people expected to be living in urban centres by 2030 along with rising affordability and job creation, the demand for mobility is set to increase. In the midst of these activities, a new trend is on the rise, the trend of self-driven rental cars that are increasingly being spotted Indiawide.

While lack of privacy in cabs and public transport, compromise on an extra seat and the thrill of being self-driven is boosting the idea of personal cars, rising awareness around the hassles of owning a vehicle has led to the rise of self-driven car rental sector. The self-driven car rental sector in India is a result of the increases in demand and the overall growth of shared mobility market globally.  Rising per capita income, increase in distances covered daily and the convenience that the young find in utilising app-based services have ensured a consistent growth in the self-driven car rental market.

A cultural shift from looking at car ownership as a symbol of luxury and status to an utility-based service has contributed to the growth. In millennial India, the concept of purchase has taken a back seat and renting, or sharing, is the new normal. Hassled with traffic and parking issues, Indians, specifically in tier-1 cities, are opting out of owning a car. Rising count of car rental service providers has ensured that customers can avail the services on need basis. Myles, Zoomcar, Eco Rent a Car, Avis, Drivezy, Kayak and Carzonrent are just some of the players in the barely five-year-old industry.  

Rising investments

The car rentals segment is expected to generate a revenue of around US$338 million in 2019. With the compound annual growth rate (CAGR) of 14.3%, the market volume is expected to reach US$576 million by 2023, as per Statista estimates. With more and more organized players entering self-driven car rental market, the investment in luxury cars is increasing.

In February 2018, ZoomCar, one of the leading self-driven car rental companies in India, raised US$40 million. With more than 5 million app downloads and 2,500 cars on the road, the company aims to expand its services across India and invest in the latest mobility technology. In August 2018, Hyundai the second largest car seller in India, led a US$14.3 million investment in the car-rental start-up Revv. Attracting customers through a doorstep-delivery-and-collection model, Revv recently introduced monthly car subscriptions that allow users to own a car without the hassle of maintenance. 

As one of the most populous countries in the world, India has an opportunity to redefine personal mobility

In November 2018, Drivezy, India’s first aggregator service in car rentals, raised US$20 million to add more vehicles to its fleet. Drivezy has pegged its growth on technological innovation through Smart Vehicle Technology (SVT). The technology enables the company to get real-time data on the location and performance parameters of rented vehicles so that the cars can be utilised in the most efficient manner. The cost of security deposits is eliminated as the vehicles are under 24×7 surveillance and can be stalled from a remote location. This has also boosted investment in technology innovation.

The year 2018 closed with French car rental company Europcar Mobility Group announcing its strategic partnership with ECO Rent a Car in India to offer global quality services in India. Even people owning personal cars have been renting vehicles to minimises operational hassles as well as on events of outstation trips, further driving demand.

Innovative models

Innovation is not the only catalyst in the transportation and car rental industry in India. A 2018 report by Niti Ayog, the policy think-tank of Government of India, highlights that the annual cost of traffic congestion is estimated to be US$21.3 billion for the four metropolis of Delhi, Mumbai, Kolkata and Bangalore. Environmental concerns and the increasing social cost of traffic congestion is impelling entrepreneurs and companies to think out of the box. Herein, car-pooling, among other solutions, have come up to resolve the concerns and have attracted investments innovations.

In a related development, a female entrepreneur from Delhi is propagating the idea of utilising available cars more efficiently. Through Myles Cars, Sakshi Vij, the founder and chief executive, had decided to tap into the unmet demand of self-driving car service providers in India. The start-up founded in 2013 owns no cars and aggregates vehicles from fleet owners, car dealers and private car owners. The aim is to reduce the count of cars on the road, while resolving the rising need of urban mobility. Besides passenger cars, commercial vehicles have also been pulled into such services.

Car leasing is another segment on the radar of automobile companies. In return for regular monthly instalments, customers get to lease a car to drive without actually owing it or paying a huge sum. The service is particularly popular with aspirational clients who see a benefit in driving different luxury models at reduced costs. A market segment that is currently less than 1 per cent of the new auto sales in India, is expected to see 15-20 per cent CAGR over the next decade, according to reports.

As one of the most populous countries in the world, India has an opportunity to redefine personal mobility. Leveraging strengths in data, technology, connectivity and entrepreneurship, the self-drive car rental and shared mobility market in India is encashing on the new landscape of opportunities.  

Recent Articles

PLI-linked Capex to reach INR 1 trn by FY24

November 24, 2022

India’s PLI schemes are expected to make various industries increase …

Read More

Govt. to assist selected telecom companies under PLI scheme

November 24, 2022

To increase local manufacturing, the Indian government aims to provide …

Read More

India ranked 8th in Climate Change Performance Index

November 23, 2022

India rose to the eighth rank on the Climate Change …

Read More