How Car Ownership Is Shifting To Car Subscription

Despite the challenges, an interesting shift has begun to take place in terms of mobility post pandemic

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The travel industry faced one of the biggest challenges it has ever seen as the global COVID-19 pandemic devastated economies worldwide. It hit airlines, hospitality businesses and transportation services particularly hard. The car rental industry was no exception as it also suffered the economic impact of the coronavirus pandemic, prolonged lockdowns and global travel restrictions.

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Despite the challenges, an interesting shift has begun to take place in terms of mobility. Since the outbreak of the pandemic, safety and hygiene have become the key priorities for all, and customers are preferring a mobility solution that they can trust. Many are skeptical about using the public transport.

In such a situation, personal mobility offers a private, flexible and safe alternative to other modes of transport. However, it is also true that buying a personal car may not be feasible for many people. For relatively short durations of a couple of days or weeks, renting a car with a chauffeur or a self-drive car is a great option. For longer term usage, a subscription-based model has started to gain traction.

Is car subscription common among consumers?

This concept of car subscription is slowly gaining traction with manufacturers getting into this space. However, if one is looking for a wide choice of car models across manufacturers, a short one-year lease is another option. The global automobile rental and leasing market is expected to grow at a CAGR of 8.1 per cent to nearly $492.6 billion by 2025 and these emerging options will contribute to the growth of the segment. 

What’s leading the growth of car rental services?

The key reason for the sudden spurt in demand for car rental services is largely attributed to consumers being attracted to a safe, flexible, private and economical transport solution.

When we talk about subscription, it does not involve conventional financing such as a down payment or monthly EMI thereby making it a hassle-free affair. Plus, the registration charges, maintenance costs, and road tax are all part of the subscription or leasing plan. Subscription and leasing models are emerging as a better alternative to buying a brand new car.

What COVID-19 did?

While this shift was already visible, it would be fair to say that the ongoing coronavirus pandemic added further impetus to this trend. With social distancing becoming the norm in this era of ‘new normal’, more people have now started to recognize the advantages of subscription services and leasing services offered by key players in the mobility industry for long-term use.

Re-enforced safety and hygiene as a priority

The coronavirus outbreak has forced all of us to follow social distancing. Contactless service has become the buzzword. As the car rental industry caters to a large number of people, they have been meticulously following cleaning and sanitizing protocols on a daily basis. Brands are also taking measures such as sanitization of vehicles after each ride and offering hand sanitizers to customers to minimize the risk of being infected by the virus. These measures have been implemented to ensure the safety and well-being of passengers, as well as drivers.

The combination of a customer-first approach and a desire to innovate consistently, players in the segment are offering solutions as per ever-changing needs of the customer in order to provide the best consumer experience.

In fact, technological advancements will play a major role in the coming years. The car rental companies are planning to invest in driverless vehicles that could drastically increase road safety. The new network infrastructure will also allow for increased usage of in-car mobile hotspots and digital assistants.

In conclusion, we are witnessing a positive wind of change blowing. The car rental industry has flexibility, choice and control at its core, as well as becoming far more meticulous in terms of cleanliness and sanitation. We’re now seeing customers re-evaluate the need for buying a car of their own in favor of the flexibility of subscription and leasing models. Their future certainly looks promising. To achieve further success, players in the industry will have to tap upcoming trends to provide the best mobility experience to its customers in the years to come.

Sunil Gupta

Written By

Avis India is a joint venture between Avis Budget Group and Oberoi Group of Hotels and is the leading car rental and leasing company in India. It is the only vehicle mobility Company in India which offers end-to-end mobility solutions - chauffeur-drive vehicles for short term rentals and long term rentals and vehicles for operating lease and self-drive in India. Since he joined the Company 8 years back, the Company’s revenue has grown over four times, IT solutions have transformed the Company and Avis has become one of the Top 3 operating lease companies in India in the 5 years since the business was launched.

He has an experience of over 25 years in leading MNCs in India across FMCG and business & financial services like Hindustan Unilever, Thomas Cook and Kuoni. His skills in the areas of sales, brand building, new business development and business re-structuring have helped in the creation and execution of strategies that have delivered high growth and profitability in diverse businesses. For the past couple of years, his passion has been the development and deployment of unique IT solutions for customer management and automation of business processes.