Caught in refund trouble, Zoomcar talks April-end solace

Greg Moran, co-founder and CEO of Zoomcar

New-Delhi based software engineer Maneesh Kumar finally got his Zoomcar refund of Rs 1.47 lakh in March, a year after three of his bookings got cancelled. Swaminathan (last name withheld on request), a Bengaluru-based software engineer, got Rs 7,000 in refunds for one of the two bookings in April.

He is hopeful that the company will refund the total of Rs 9,000 soon.

This is the story of dozens of people in India, who had used the services of self-drive car rental startup Zoomcar in 2020, and had not been able to avail of their refunds, until recently, despite repeated follow-ups.

Hit by the pandemic, the company was shut from March-August 2020, but resumed operation in September the same year.

Zoomcar expedited the refund processing over the last few days and said that it is “in the process of clearing the rest within this month (April 2021).”

“We are actively addressing the issue and have already cleared over 90 percent of all refunds and are in the process of clearing the rest within this month.  These complaints represent less than 1 percent of our overall bookings and users,” the company spokesperson said in a statement.

Zoomcar and COVID-19

Bengaluru-based Zoomcar was started in 2012 by Greg Moran and David Back and focussed on car rentals with an initial investment of $215,000 from angel investors. The duo started the operations in Bengaluru in February 2013 and it has expanded to 45 cities in India since then. Back left the firm in 2015.

According to the data from Tracxn, the company has received a total funding of $193.6 million. Key investments include $24 million from Ford Smart Mobility, $40 million from Mahindra Rise and $30 million Series D from Sony Innovation Fund in January 2020. The company recently raised $39.8 million in a Series E round.

Since the onset of the pandemic, most travel-related services have been hit. Zoomcar was no exception. According to data shared by business intelligence platform Tofler, the company’s loss doubled from Rs 201.92 crore in FY19 to Rs 424.35 crore in FY20. Its expenses too increased -- from Rs 469 crore in FY19 to Rs 629 crore in FY20.

In a statement to Moneycontrol, a Zoomcar spokesperson said: “Zoomcar’s operations were completely shut due to the Coronavirus-led lockdowns in India from the middle of March through August.”

As its business took a hit, refunds became a casualty.

Delay in refunds

From the documents shared by users with Moneycontrol, Zoomcar owes north of Rs 18 lakh to customers, including associates and subscribers. In addition, vendors of Zoomcars were affected. The company did not respond to the specific query about the quantum of refunds.

However, what irked the users were the prolonged delay and lack of clarity from the company on the processing.

Kumar, who was quoted earlier, said that he had sent 127 emails to Zoomcar. “It is understandable that lockdowns have been tough on everyone. But it was equally tough for people like us as well,” he said.

What was unacceptable for users like Kumar was that the company had started operations since September and taking time to refund the money for services they did not even use.

Aniruddha’s Zoomcar booking got cancelled for unavailability and the Rs 6,500 he paid is stuck with the firm.

In case of Swaminathan, whose refund amount is to the tune of Rs 16,000, it was a combination of cancelled booking and a broken-down car.

Swaminathan is a native of Hubli and is what you could call “super miles” customer for Zoomcar. In August 2020, he had to leave for Hubli, where his parents stay, in an emergency and had booked Zoomcar for 10 days.

Trouble started after he reached Hubli when the car broke down as he was taking his parents to the hospital around 8.30 pm. Help was hard to arrive due to the lockdowns and it took him a few days before he could get the car repaired with the help of Zoomcar executives.

“As per company policy, if there is a breakdown, the company will reimburse the money for that period. So, my refund amount had come to about Rs 9,000,” Swaminathan said. In another instance, he made an advance booking for November but soon cancelled it. “This booking amounts to about Rs 7,000,” he said.

After weeks of calling the customer care and mailing since August, Swaminathan took to Twitter to share his grievance.

It was the process most followed – constant tweeting, mailing, and filing complaints in consumer forums and cybercrime to get the attention of the firm. #ZoomcarRefundScan on Twitter has hundreds of tweets asking for the company to refund the money. Moneycontrol has viewed the copy of both cybercrime and consumer grievances filed by some users.

About 250 people formed a WhatsApp group to help others get refunds by sharing information. More than 100 people in the group now have received refunds.

Responding to a query about the delay, a company spokesperson said in a statement: “Zoomcar’s operations were completely shut due to the Coronavirus-led lockdown in India from the middle of March through August. As lockdowns eased and Zoomcar opened up for business, there was a huge surge in demand, and with not enough cars in supply, we faced the problem of some refunds piling up.”

Now, it is actively looking to address the issue. “While COVID-19 pose logistical constraints, we maintain our position of full customer transparency and work continuously to provide them best in class experience,” the statement added.

Zoomcar’s challenges

While the pandemic affected the mobility segment, Zoomcar was facing operational issues even before that.

Ankur Pahwa, Partner, EY, explained that the company had four key challenges: asset-heavy model, fleet utilisation, subscription service and lack of predictability on consumer trends.

The company has an asset-heavy model, where it owned more than half its fleet, said an analyst who tracks the company and did not want to be named. Maintaining a large fleet incurs recurring cost and that makes scaling up tough. In addition, the company faced operational challenges as its utilisation was low and not placing the right inventory at the right location.

About 250 people formed a WhatsApp group to help others get refunds by sharing information. More than 100 people in the group now have received refunds.

The same could be said for the collaboration Zoomcar had with the Mahindra E2O electric car in 2017. The huge push towards EVs was absent then and the infrastructure was yet to be developed. However, the pandemic has changed that to a large extent.

The pandemic boon

Harish HV, Managing Partner, ECube Investment Advisors, said, “When Ola and Uber were in ascendance, pre-COVID-19, the demand for self-driving car rentals was getting impacted due to issues like parking.”

But COVID-19 brought a change in that mindset. “Thanks to COVID-19, if people wanted to go out, they started showing preference for Zoomcar and their equivalent. So that gave them a little bit of boost.” It helped that proliferation of services like Ola and Uber services like Ola and Uber had increased on dependence on online aggregator services for mobility.

Increasing COVID-19 cases are likely to dampen this momentum Zoomcar saw over the last few months. But in the medium to long term, there are more opportunities for Zoomcar, if only it can address the operational issues, and reinvent to tap into the opportunity the pandemic has presented.

The company, Pahwa from EY said, has to go for an asset-light structure or improve the utilisation of its existing fleet through smarter subscription services by building better predictability of consumer trends.

Zoomcar was used by people for weekend getaways or trips rather than for daily commute. As Harish pointed out, office-goers preferred the use of Ola and Uber to avoid the hassle of parking. That was also what made its subscription services less attractive.

At the back of the pandemic, people are gravitating towards Zoomcar. Having a smart subscription model, where people can lease the vehicle for longer duration as companies move into hybrid working models is something the company will have to focus on, Pahwa said.

The other segment where the action lies is, clearly, electric vehicles. When the company launched the EV partnership in 2017, the market was nascent. However, there is a greater adoption now, with the Centre pushing the EV agenda and state governments offering incentives for EV adoption.

This is a segment that could prove a better bet for the company and Moran, co-founder & CEO, in a recent media article, has indicated having an EV fleet.