Driving The Change: How Subscription Models Are Transforming The Auto Industry

Greg Moran Jul 03, 2020

The COVID-19 pandemic’s impact on the globe has been palpable. The outbreak has upended our lives overnight and taken a heavy toll on businesses across verticals. Almost no industry has escaped unscathed from the pandemic’s onslaught and the automotive industry is no exception. Over time, our choice of mobility and transportation has evolved. Most of us either opt for public transport or a commute using a vehicle of our own. However, with the pandemic-induced mayhem continuing, making use of public transport is simply not an option owing to safety concerns. When it comes to hygiene, flexibility and privacy, private transport is ideal. But, purchasing a car might not be a feasible solution. This is where rental cars and subscription-based models come into the picture.

With the rental car market set to grow at a CAGR of 15-20% in India, the market is highly lucrative and subscription-based models have become a go-to option for many. Although not a brand-new concept, the subscription model has only recently gained immense traction. In the hygiene, safety and flexibility aspect, subscription-based models certainly come out on top with brands in the industry ensuring stringent hygiene and safety measures with the help of new-age technologies. Let us take a look at how subscription-based models are revolutionizing the industry and quickly becoming the one-stop solution for the masses.

The paradigm shift towards subscription models

What is a car subscription? Car subscription is a service where the customer pays a recurring fee in exchange for the right to use one or more vehicles. Why the shift towards this model? With a population of over 1.3 billion people, there is a significant shortage of space, particularly in urban areas where the population is increasing rapidly. Owning a car comes with its fair share of problems such as parking space, the volatile fuel prices, insurance premium, maintenance expenses, etc. These are now making people hesitate to purchase a car.

Additionally, the pandemic has resulted in several people losing their jobs, putting a strain on their income and limiting it to essentials such as food and pharmaceuticals. With shorter lock-in periods and nominal pricing, subscription models are an easier option. Moreover, the needle has now moved from ownership to the experience. Subscribing a car allows one to have a seamless and safe experience. Also, for those who like to experiment with cars and prefer variety, subscription-based models are the perfect choice since you needn’t stick to one car for a long period of time.

Powered by technology for a hassle-free experience

The key reason for subscription models being safe, hygienic and convenient is technology. The usage of cutting-edge technologies such as AI, ML and RPA by brands in the industry ensure that the vehicle is safe for usage and the customers’ experience is first-class. With multiple protocols such as keyless entry systems and thorough sanitization of the entire vehicle, companies are prioritizing customer experience, safety, hygiene and convenience with technology’s assistance. Apart from the vehicle itself, car rental companies are going the extra mile with chatbots and virtual assistance to help customers with their queries. These will undoubtedly offer an appealing experience and further propel the subscription model’s popularity amongst customers.

India’s automobile industry is witnessing a radical change with evolving customer preferences. The industry is also progressing at a breakneck pace. According to the automotive Subscription Services 2020 Global Market Report, the global automotive subscription services market is poised to grow by USD 9.15 billion between 2020-2024, progressing at a CAGR of 64% during the forecast period. While we cannot compare if car subscriptions will become more popular than car sales, the emergence of the subscription model certainly infuses new dynamics into how Indian customers view and utilize mobility and shared transportation. Considering the aforementioned, the future of the car rental industry and the subscription model appear bright and promising.