Covid-19 pandemic has lead to a tectonic shift in the way people move. With social distancing becoming the new normal, people have begun to prioritise personal mobility like never before. And in this scenario, car rental companies are seeing a window of opportunity to scale up. And the company that has found for itself a sweet spot in this new world is the Bengaluru-based car rental company, Zoomcar.
The company—which was founded by the American duo David Back and Greg Moran after dropping out of a business school— has come a long way since it started its operations almost eight years ago. During those initial days, Zoomcar started off with just seven cars in its fleet, and now has ambitions to reach near-about 20 million bookings by 2022.
In a candid conversation with Fortune India, the co-founder, Greg Moran, who is also the company's chief executive officer, argues how now, with the current ongoing recession, there has been an “exponential’’ spike in demand for car subscriptions. “Last couple of months have been quite a wild ride for everyone and particularly for those in the mobility sector. Car subscriptions can prove to be a better option than ride hailing, and also as a more affordable and quicker way of acquiring a car, delivering a safe personal mobility replacement,” he says.
Zoomcar—which was shut for two months during the Covid-19-induced national lockdown—is already seeing an uptick in recovery as it begins to slowly rebuild its operations. In fact, in the last couple of months, Zoomcar has seen a 400% rise in demand, and Moran expects that this will settle down to 200%-300% over the next few months as bookings and subscriptions begin to resume.
“Each industry needs to adapt itself to the new normal. The car rental industry, to that end, is well-equipped and prepared to serve its customers. Covid-19 has changed the dynamics of our economy indeed. What used to be the norm till last year may well become obsolete in the coming weeks,” Moran says.
He could be right. In fact, Zoomcar's data also suggests that people have already started looking for shorter-term mobility options as opposed to a long term expense of owning a car. There has also been a spike in demand for cars for personal work and emergency use cases. Moran believes in the India growth story.
The challenge for him, however, is to now rethink the business model and look for something that provides a steady stream of revenue to mitigate business risks under Covid-19 constraints. “Our talk is now to understand how the consumer behaviour will change post-Covid and how to manage costs in the absence of business continuity,” he says.
According to Moran, Zoomcar did take its time to reflect on its business model, technology infrastructure, and understand what its customers were seeking. Moreover, he points out that one of the biggest trends which Covid-19 has thrown up is the need to use personal mobility, as opposed to using a public transport. But there is a catch. The pandemic has also made the economy go awry, and in that scenario, not many would prefer to invest in buying a car for themselves. This is where car rentals come in.
And he is optimistic that he will be able to crack the needs of different kinds of customers. As Zoomcar is seeing more demand for in-city trips compared to outstation ones, and a strong focus on shorter term subscriptions, Moran's current focus will be to diversify on this front and ensure that Zoomcar is covering all cities.
“I think this is an interesting time for our business because everyone is in a constant state of evolution. I believe that the necessity of a mobility service like Zoomcar has become more pertinent than ever before. Especially, in a time like Covid where a lot of folks are laid off, unemployment rates are sky rocketing and not many are talking about the actual true unemployment level where people with disposable incomes have been majorly hit,“ he says.
Moran points out that one of the biggest trends which Covid-19 has thrown up is the need to use personal mobility, as opposed to using a public transport. But there is a catch. The pandemic has also made the economy go awry, and in that scenario, not many would prefer to invest in buying a car for themselves. This is where car rentals come in.
Moran, in fact, insists on seeing the sector through the prism of macroeconomic conditions affecting India. “It actually plays really well for our type of solution, because you are able to deliver something well which is sanitised, clean, personalised, private as well as something which is affordable. So that, in a nutshell, is one of the macro tailswinds which is really helping [us] as we emerge from the pandemic,“ he explains.
Zoomcar runs a car subscription service, Zap, which lets users subscribe to a car for longer periods of time. Car rentals, for example, are typically used for a weekend, or one week at a time, but when it comes to subscriptions, people are generally given an option for a lock-in period of two years or more. But that's also changing with time. Zoomcar has seen a shift in demand on the subscription side as well. “We have multiple options for subscription, but the shift in demand has been towards one, three, and six months. We anticipate a significant increase in car subscriptions post-Covid-19, as consumers look to avoid public transport without the burden of car ownership. Car subscriptions will continue to evolve and grow into more flexible plans and longer durations of leases ending in 12, 24, or 36 months,“ he says.
Zoomcar now has flexible subscriptions too that range between 1-36 months. Moran says that with shorter lock-in periods and affordable overall cost of acquisition, subscriptions are more viable than actually owning a car. “As such, the craze over purchasing news cars has been declining in recent times. Even in the post-pandemic world, the rental car industry has advantages to leverage, fuelled by a demand that is at an all-time high,“ he says.
Interestingly, 90% of the subscribers of Zoomcar are ‘non-intenders’, which means that they don't usually come with an intention to subscribe. But zero down payment, no car loan, no maintenance cost, and no insurance cost, suddenly makes them feel like they can afford a car.
Moran has his ears to the ground. He says that the key is to put forth mobility as a service that is made easily accessible, whenever the need arises. For example, the car's services are currently more concentrated around a younger audience from Bengaluru, Hyderabad, and Pune due to the concentration of more ‘techies’ who seem to be one of the early adopters, followed by Chennai, Mumbai, and Delhi-NCR.
Another important reason why Moran feels that Zoomcar will be the future of mobility is because of the company's ability to leverage technology. “When you are not using your subscribed car, you can list it back on Zoomcar through a few taps on its subscriber’s app, to share the car with its short term renters and offset the subscription cost by up to 70%, which makes the subscription cost drastically lesser than the monthly EMI of the same model,“ he points out.
For Moran the use of technology in cases like these has helped them convert a major middle class population, who earlier were non-intenders, into subscribers. “This is a classic example of democratising a product using technology,” Moran exclaims.