DRIVE SHARE AND SUBSCRIBE
Fortune India|February 2021
SAFETY AND AFFORDABILITY CONCERNS AMONG COMMUTERS HAVE GIVEN A FILLIP TO SHARED MOBILITY, WITH SUBSCRIPTION-BASED MODELS GAINING TRACTION. WHAT WILL IT TAKE FOR THE INDUSTRY TO REALISE ITS TRUE POTENTIAL?
PRERNA LIDHOO

In July 2020, India’s car market leader Maruti Suzuki tied up with ORIX Auto Infrastructure Services, a subsidiary of ORIX Corporation of Japan, to launch a vehicle leasing service for the Indian market.

In August 2018, Hyundai Motor India made an undisclosed investment in self-drive car-rental startup Revv. Earlier that year, Mahindra & Mahindra invested around 176 crore in Zoomcar.

Tata Motors recently unveiled a subscription plan for the Nexon EV; MG Motor India and Volkswagen are among some other players looking to explore leasing models in the country.

Get the drift?

With the sales of passenger vehicles set to decline in the range of 22%-25% in FY21 due to lockdown measures put in place to contain the spread of the Coronavirus, and a sharp drop in affordability among customers as a result of the economic slowdown, car makers have been looking at ways to reduce the cost of ownership of vehicles for prospective consumers. Going by market trends, subscription-based vehicle “ownership” models are fast gaining traction among urban customers.

Of course, vehicle leasing or subscription-based access to old and used vehicles isn’t a new idea—it is quite common in the commercial segment. It is just that the Covid-19 pandemic has accelerated the adoption of this model in the personal mobility segment. “Leasing has been mostly successful in the corporate world where there are tax benefits, depreciation benefits, and so on,” says Shailesh Chandra, president, passenger vehicle business unit, Tata Motors. “I think subscription will gain traction [among individual owners] as the industry works on creating awareness and a stronger value proposition around the subscription offers.”

Chandra has a point. Vehicle leasing services, immensely popular in the U.S. or Europe, have been largely confined to the corporate sector in India. Maruti, for instance, had previously ventured into the space without much success.

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