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    Car rental services like MiCar, Zoom-Car & Carzonrent bet big on India; roadblocks ahead

    Synopsis

    While carsharing industry in India is still nascent, it is set to grow exponentially, feels Agrawal of Mi-Car, which plans to expand to Bangalore, Pune, Hyd.

    ET Bureau
    When it comes to cars, Farheen Amber is always in top gear every weekend. Renault Duster, Ford EcoSport, Honda Brio, Toyota Etios…the 32-year-old media professional has a tough time deciding the car to drive for her weekend shopping. “To do justice to all, I drive one of them every Saturday,” says the senior producer at Star Network in Mumbai, adding “but for a long drive with my hubby on Sundays, it has to be my favourite Honda CRV.”

    But how does she manage to keep so many cars? “You must be joking,” says Amber, bursting into laughter. “Why would I buy so many cars? In fact, I don’t own a single car. I take cars on rent whenever I want to.” Amber is not the only one hooked to carsharing — a selfdrive, on-demand, pay-as-youuse car rental service designed for people who want to rent cars for a short period of time. “It’s sheer stupidity to buy a car and not drive it for most part of the month.”

    Financial Sense

    There are thousands like Amber who are quite capable of buying a car but ditching the option in favour of renting a car because they don’t have a real need for a car or need it only for a specific purpose — like a weekend drive or a shopping binge. So, one can rent a car by the hour, day, week or month, depending on one’s usage.

    “It’s a smart move and makes financial sense,” explains Amber, who commutes everyday to office by local train and needs a car only on weekends. Call it a smart move or a desire to drive a car without any strings attached, Indians are increasingly looking at renting vehicles. And companies are jumping on the self-drive car rental bandwagon to cash in on the growing opportunity.


    Image article boday
    Take, for instance, MiCar. The New Delhi-based self-drive car rental service company rolled out operations in Delhi-NCR early this month, has a fleet of 50 cars and plans to scale up to 600 cars in a year.

    “The time for carsharing has arrived in India,” says Suyagya Agrawal, co-founder and director of MiCar. “We want to be the household neighbourhood car of the country.”

    Taking Global Cues

    Twenty-five-year-old Agrawal had a first-hand feel of the carsharing industry when he was completing his higher education in America.

    “For every rented car, there are 15 fewer owned cars on the road in the US,” he says, citing figures from the website of Zipcar, the world’s largest carsharing service provider. Over 40% of Zipcar’s members have given up ownership of personal vehicles, he adds.

    There are studies suggesting that one can save up to $3,000 per year if one shuns a car and opts for sharing. In 2009, for the first time, the number of Americans who ditched their cars was greater than those who purchased new cars. And over 4 million people are expected to opt for carsharing in the US by 2020, points out Agrawal.

     
    Globally, carsharing has evolved. As of December 2012, there were over 1.7 million carsharing members in 27 countries, according to the Transportation Sustainability Research Center at UC Berkeley. And by 2020, it is estimated that over 12 million people will hop on to a carsharing model, and the revenue from the business is likely to breach the $6.2-billion mark.

    The scope for the business is such that even traditional car rental companies have launched their own sharing services such as Hertz on Demand, Enterprise CarShare by Enterprise Rent-A-Car, Avis On Location by Avis and Uhaul Car Share by U-Haul.

    Opportunity for Automakers

    Carmakers across the world have also been transforming themselves into service providers. BMW and Daimler AG (which owns Mercedes-Benz), for instance, have rolled out integrated mobility-on-demand solutions. Daimler through its car-2go subsidiary operates carsharing fleets in 26 cities using its Smart Cars, and it plans to take its membership to 1 million users.

    While the carsharing industry in India is still nascent, it is set to grow exponentially, feels Agrawal of Mi-Car, which plans to expand to Bangalore, Pune and Hyderabad next year. The car rental market in India is estimated at over $4 billion and is growing at a rate of 10%. The opportunity is immense and it’s the young professionals who will drive the change, adds Agrawal.


    Image article boday


    Mahesh Singh, for sure, is one such professional that Agrawal is betting big on. The 34-year-old manager (resource management group) at Tech Mahindra in Noida has been driving a Hyundai i10 for the past six years. And it was early this year that Singh planned to gift a car to his wife, a homemaker, on her birthday.

    “But sanity prevailed and I decided to shun this option,” recalls Singh, who had a hard time pacifying his wife. “She was quite upset with my decision but when I made her realize the economics behind the move, she just loved it,” he recalls, adding that the argument that his wife could drive a car model of her choice every week was the clincher.

    It’s insane to own more than one car. I have seen people fighting for parking space in their residential societies,” says Singh. The idea of having multiple cars is okay for the business class, but for salaried, it’s a criminal waste of resources, he adds.

    Ready for a Long Drive

    No wonder that Carzonrent, one of the largest car rental service providers in India with a fleet size of 7,500 cars, has been witnessing a jump in users of its self-drive service, called Myles. And most of its users are those who already have a car, much like Singh.

    “Most of the users of Myles are those who have dropped the idea of buying a second car. That’s becoming an interesting trend over the past few months,” says Sakshi Vij, executive director of Carzonrent.

     
    Myles, which was launched in November 2013, has grown from a fleet size of 14 cars to 250 and the company plans to pump in Rs 400 crore to add another 5,000 cars in three years. “Self-drive is a good replacement for the second car as people don’t use their second car to its full potential,” adds Vij.

    Kiran Kanth is one of the many determined to exploit the full potential of the self-drive model. The 32-year-old software engineer in Bangalore owns a Santro Xing and is passionate about driving. However, during weekdays, he loves driving either a BMW or a Mercedes. “They don’t cost a bomb, just Rs 4,000 per day, as I get 40% off during weekdays.

    The last time I hired a luxury car for just Rs 780 for two hours,” he says. But the best thing, apart from the rates, is that one gets to hire the luxury cars for the number of hours wanted and not for the entire day, says Kanth, adding that he has tried all the 11 cars in the fleet of ZoomCar, a self-drive car rental provider in Bangalore.

    David Back, co-founder of Zoom-Car, believes the self-drive business has a bright future in the country. Reason: Car ownership rates in India are very low, even in the tier 1 cities. “That is the biggest reason why I think India is a better longterm market for carsharing than the US,” says Back. “It is a lot easier to convince someone not to buy a car in the first place than it is to persuade someone to sell a car they already own.”

    Image article boday
    The Bangalore-based company, which started with a fleet of seven cars and boasts 10,000 active members in the city, now has 200 cars across 25 locations.

    It offers a range of models — from hatchbacks to beamers and sedans — that can be rented for as low as Rs 225 an hour and going up to Rs 999.

    The company plans to be a pan-India player with a presence in 10 cities in three years. “The demand for self-drive is astronomical in Bangalore, which is not as flashy as Delhi where owning a car is a status symbol,” says Back.

    The Roadblocks

    The tendency to flaunt could be the self-drive industry’s biggest hurdle in India. “The biggest challenge to the popularity of this concept is the mindset of the Indians. Owning a car is still a status symbol in India,” says Abdul Majeed, an auto expert and partner with Pricewaterhouse-Coopers India.

    Agrawal of MiCar is aware of the challenges. “We will soon start an awareness campaign to make people understand the benefits of sharing a car rather than owning a car,” he says. “From owning and flaunting to disowning and flaunting would soon be the biggest cool in the country.”
    The Economic Times

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