10,000 Indians could sign up for car subscription services this year

Representation Image (Credit: Pixabay)

Vikram Karmakar, a Noida-based entrepreneur, was looking for an electric car, primarily for official purposes. While he had the option of buying it by making a down payment of Rs 12 lakh for a five-seater e-SUV (priced in the range of Rs 23-27 lakh), in addition to the Rs 35,000 EMI, he thought of getting the vehicle subscribed at Rs 70,000 per month.

For him, electric vehicle (EV) is a “new technology” which he can utilise for three years and can later get it swapped with another EV with “advanced battery technologies”.

What is car subscription?

Under this method, you can own a car without any down payment or taking any loan. There will be a monthly fee that covers insurance, service and maintenance. Plus, there are no long-term commitments - you can return, extend the service or buy the car when you want.

“I went for the subscription model as I have the option of returning this vehicle after two years. While the monthly outgo is relatively higher, compared to an EMI, my operational costs are much lower as I am able to save Rs 15,000-20,000 per month from fuel costs. Also, I get a GST refund of 7-8 percent on the monthly rates,” said Karmakar.

Likewise, Kulbhushan Parashar, a consultant from a mining company operating out of Gurugram, wanted to go for a premium SUV. While he opted for a model priced in the range of Rs 15-22 lakh (ex- showroom), he decided to pay an extra bit, at Rs 36,500 per month, by subscribing to it, rather than opting for Rs 28,000-30,000 per month as EMIs.

For him, getting the SUV subscribed has eliminated the hassles related to paying substantial down payments and related costs such as insurance, maintenance, roadside assistance, etc. Moreover, it comes with shorter lock-in periods and reasonable pricing. All these make it a more flexible, affordable, and convenient replacement of car ownership.

With consumers like Karmakar and Parashar, who are increasingly looking to use the vehicles they desire for a shorter duration at affordable rates rather than owning them on a long-term basis, ‘car subscription’, as a concept, has gained a lot of traction over the last few years.

Furthermore, with consumers getting the opportunity to grab the keys of their favourite SUVs and EVs, the domestic vehicle subscription market is getting a further boost.

“EVs on subscription models make more economical sense as technology is evolving and carmakers are regularly launching new EVs with better range,” said Gaurav Vangaal, Associate Director, Light Vehicle Forecasting, S&P Global Mobility.

“This allows consumers to regularly upgrade the vehicle in a couple of years, which is one of the USPs of the subscription model. A consumer can adopt new products and the latest technologies by paying a subscription,” he said.

Dissecting the market

While there is no research report on India’s vehicle subscription market, industry estimates show that nearly 5,000 units of passenger vehicles in the price range of Rs 3-18 lakh across various segments are subscribed in 2022.

According to industry players, such as Myles and Revv, these are people who are in the age bracket of 23-40 years and have an average monthly income of Rs 75,000- Rs 2.5 lakh.

The total number of subscribed cars are expected to double this year, and are expected to account for 10 percent of the total passenger vehicle market in the next couple of years, as predicted by industry players.

Subscription players count on new-age buyers

Currently, there are three kinds of players in India's vehicle subscription market:  a) Traditional leasing firms like Avis, Orix, and Myles; b) Mobility companies such as Revv and Zoomcar; and c) major Original Equipment Manufacturers (OEMs) like Maruti Suzuki, Hyundai, Mahindra, Tata Motors, Volkswagen, MG Motor, etc.

Myles, a mobility firm that provides vehicle subscription and sharing plans, said that it currently has 2,000 cars live on its platform, and it will be scaled up to 50,000 units in the next 20 months. While the company claims that it has seen a 4x growth in bookings between the financial year 2022 and 2023, it has seen an over 100 percent increase in EV requests in the last few quarters.

Furthermore, it also claimed that 60 percent of the total fleet is SUVs and the share may go up further.

“We currently see 25 percent of our fleet as EVs. With multiple launches by carmakers, we are expecting a surge in demand, going forward,” said Sakshi Vij, Founder, Myles Cars. “We are seeing compact SUVs as a high- demand segment and will see similar trends in the future as well.”

For Revv, the country’s fastest-growing self-drive car rental service, car subscriptions constitute more than half of its business and the company has served more than 25,000 subscribers so far. While the company didn’t share the fleet size, its official website indicates that it has around 3,500 cars in its fleet.

“We have doubled our business, post COVID. We do expect that, in 3-5 years from now, two-third of our fleet will be deployed for subscription. We do believe that the share of SUVs will continue to increase as has been over the last few years. Going forward, half of our fleet will be SUVs, said a Revv spokesperson. “In the next two years, we do see a significantly higher penetration of EVs on the platforms available for subscription,” he said.

Carmakers too remain upbeat

Passenger vehicle market leader Maruti Suzuki India Limited (MSIL), which gets more than 10,000 enquiries every month under its subscription programme, does about 500-600 retails per month now.

Its subscription sales were about 100 per month in FY2021-22, 350 per month in FY2022-23 and the company aims for 7,000 in the ongoing fiscal.

Shashank Srivastava, Executive Director, Marketing and Sales, Maruti Suzuki India, maintains: “Subscription is a growing preference for customers who want asset-light usage of vehicles. Since it is a new concept, expectedly, conversions will be much better after consumers understand the concept.”

Hyundai Motor India Limited (HMIL), which was the first carmaker to get into this route, witnessed double-digit growth in this vertical over the last few years. The South Korean carmaker maintained that the top three subscribed models are Venue, Creta & i20, with customers preferring to subscribe for monthly plans.

While an HMIL spokesperson declined to comment, a senior company official had told Moneycontrol earlier this year, We have the first- mover advantage and are confident that the subscription market is definitely going to grow. There will be some enhancement of car subscribers this year too.”

Mahindra and Mahindra (M&M) is another player which is betting on this vertical very aggressively. Veejay Nakra, CEO – Automotive Division, M&M,  told Moneycontrol on phone a few months earlier, “This product of subscription was typically created a couple of years back more for GenZ and millennials who are looking to use our premium SUVs but could not afford it. It is just a matter of time when we are going to see significant traction.”

Tata Motors also introduced the subscription model for the Nexon EV as the company believes that through this medium, its overarching goal is to address the consumer that prefers the idea of ‘usership’ over ‘ownership’ for the aforementioned model, thereby expanding its “overall customer base”. The company declined to comment for this story.

Saket Mehra, Partner, and auto sector leader, Grant Thornton Bharat, states: "In the last 2-3 years, the growth in young urban population, with a high propensity to spend and the need for options, convenience and vehicle subscription is on the rise. Owing to consumer preferences, there is immense scope for utility vehicles (UVs) to drive the subscription car market in India. Currently, UVs make up for the most available options on major vehicle subscription platforms in India.”