As the global economy opens up gradually, there are bids being made that will reform the automobile industry over the coming years. With calls for sustainability and a significantly inflated market, the focus has shifted towards the optimism presented by self-drive car rentals. While globally the concept does not seem too novel, the industry still remains at its nascent stage in the Indian markets.
With chauffeured cab services like Ola and Uber becoming a commonality on Indian roads, a lot still remains to be seen on when and how self-drive car rentals too will gain such momentum. For instance, global industry reports establish that the self-drive car-rental market in the US has overtaken and contributed to $30 Billion in comparison to the chauffeured market of $ 15 billion, signifying a surge when compared to the self-drive market in India. Still in its developing stage, the Indian self-drive market is just hovering over a market cap of $1 Billion, while in the US, it has taken leaps to dominate the industry. It will be interesting to observe how the Indian stakeholders harness this industry’s potential as the conditions have never been as much in favor of this industry as now. An inflated market and delayed delivery dates of new vehicles have nudged Indian customers with a new perspective to consider self-drive car rentals amidst all the expectations and anticipations surrounding it.
Interestingly, while global players are looking at opportunities to invigorate the industry by introducing Electric Vehicles (EVs) into their fleet, the Indian market still grapples with normalizing the idea of self-drive car rentals. As per a recent industry report, the global self-drive car rental market is expected to grow at an annual 6.88 percent. It is all set to reach US$91.407 billion by 2027 from US$57.389 billion in 2020. However, with EVs promising lesser maintenance costs and more savings on fuel costs, owners of these rentals are looking at a paradigm shift. Players are inducting EVs in their fleet given their digital penetration has brought in transparency and asset security which has thereby reduced insurance costs. The little to no maintenance costs on these automobiles allow owners to rent out cars at cheaper prices and increase their uptime significantly, hence resulting in increased profits. Such a model has been explored by Hertz in the international market, with the company signing a deal with Tesla for 100000 cars. Now, instead of investing in vehicles that run on fuel, they prefer investing in EVs. This presents an excellent opportunity for Indian players in the industry to adapt to the shift and navigate novel ways to emerge as prominent players. They can skip a step, and move towards procuring EVs while playing a key role in shaping the Indian self-drive car rental market.
When it comes to the global EV market, there is a sense of optimism that stems from the fact that in 2022 the market witnessed exponential growth with EV sales exceeding 10 million alongside a major influx of investment. This expansion of the EV industry is working in favor of Indian stakeholders who have either found a strong foothold in the self-drive car rental industry or are looking at entering it. It is predicted that India’s domestic electric vehicle market will see a
49 percent compound annual growth rate (CAGR) between 2022 and 2030, with 10 million annual sales by 2030 given how efficient, developed, and modern EVs are. To top it off, charging an EV is way cheaper than getting a full tank of fuel. The EV market and the self-drive car rental industry will grow together if channeled towards each other.
Self-drive car rentals, on the other hand, are the Segway that bridges the gap between shared mobility and the EV boom. The self-drive car rental industry is a huge stakeholder in the shared mobility culture. About 82 percent of the population does not own a vehicle, adding to that, commuting in India is difficult because most distances greater than 7 kilometers do not have a direct public transport option. Shared mobility solves this, while also allowing folks to reduce traffic congestion, saving up on fuel costs and not engaging in parking space hassles. However, this is one side of the conversation; the other side is that most people now prefer not owning cars given the highly inflated automobile market. They choose to rent a car and drive it themselves. This offers them flexibility and the opportunity to save up on costs of maintenance that a purchase would not allow them.
The self-drive car rental market in India is heavily concentrated in tier-1 cities like Hyderabad, Delhi, Bengaluru, and Mumbai. This insinuates that there is ample scope for this market to grow further. One of the key factors affecting this selective accumulation is the lack of infrastructure and capital. Owners of these rental agencies do not necessarily have access to massive capital to be invested in procuring a large number of cars. However, recent investments in startups have ensured that such startups have the capital they need to boost their business. Additionally, major automobile players like Hyundai, Mahindra, Indus Motors, amongst others need to take the lead in forwarding these developments.
A big challenge also remains to develop more EV charging stations in rural sectors. A sector that is crucial to the growth of the self-drive car rental industry. From a customer’s perspective, there is still scope for hesitance that rests when it comes to self-drive car rentals. This hesitance percolates into concerns regarding expensive security deposits, less flexibility, and expensive tariffs. There remains an urgent need for self-drive car rental establishments to adopt a phygital mode of communication, wherein bookings are facilitated over mobile applications, and customer service too finds its way over applications. A swift and proactive mechanism to address customer grievances and questions will only result in a robust relationship between the rental service brand and its customers.
With EV technology maturing significantly, and customers seeking an experience that is comfortable, luxurious, and flexible at affordable costs, there is an overall sense of optimism prevailing in the self-drive car rental market. Introduction of subsidies and a conducive tax regime by the government can further encourage and aid the growth of new players in this relatively new market. Emerging players will now need to adapt to the advancements in the industry, invest in a sustainable fleet of cars, and strive at making the journey easier and more comfortable, while also sticking to the need to be affordable. EV manufacturers have prioritized making their cars less maintenance, more user-friendly, and cost-effective. This is exactly where self-drive car service players need to tap into by being quick enough to tame the new advancements through subsequent trial and error cases. While the transition to self-drive car rentals in India may not be as dramatic as compared to other parts of the world, we are confident about its slow but gradual success given the immense scope for disruption that it presents.
