Why vehicle subscriptions are a win-win approach

Flexible ownership can bridge the gap between consumer demand and sustainability

By Anannya Das
Published: Thursday 24 December 2020

I recently came across a poster advertisement on Twitter. It said: ‘Maruti Suzuki Subscribe.’ The first thing that struck me was: If I subscribe, how am I owning and not renting?

Delving into the details, I found it did mean owning a car and not renting one. It is an innovative way to own a vehicle.

It is perfect for someone like me who is sceptical about owning a personal vehicle for daily use as I am scared about driving on Delhi roads, but might do so occasionally.

It is also perfect for people who are reluctant to own a car immediately, people who might change cities, people who shifted to public transport or are looking for a shift from personal to public transport and so on.

It might also prove to be a game changer for a city moving towards vehicle restraint and demand-management strategies for regulating vehicles from locking urban land, etc.

A win-win approach

The usual chain of events for owning a vehicle involves compulsory interaction with multiple stakeholders right from purchasing, registration, taxation, insurance, usage, maintenance throughout the vehicle’s lifetime, de-registration and scrappage.

Ownership without having to worry about any of these and a single-window transaction through an original equipment manufacturer (OEM) makes it a hassle-free approach for the user.

Whether it is for the undecided first-time user, or the users’ part of the cyclic (reselling-purchase) car-consumer-market, such an ownership model will indeed increase the flexibility of options.

A quick calculation showed that ‘ownership rent’ enlisted on the manufacturer’s website for 25 variants of four-wheelers for 24 months ranged from Rs 3.8-8.4 lakh for models priced between Rs 5.7 lakh and Rs 12.6 lakh.

This is considering that the depreciation value of 30-50 per cent on the same models for 2-3 years is Rs 3.4-7.6 lakh, that is quite close to the rental value of ownership.

Additionally, 24x7 on-road assistance, with no extra cost other than rental, makes it a win-win approach. Contrarily, other existing rental options in the Indian market are expensive for a similar period.

Changing consumer market

Consumer attractiveness drives a change in market and mobility behaviour in cities. Lately, innovative marketing approaches have become synonymous to ‘flexible-vehicle-ownership’ in the global market.

Europe saw six emerging models in 2018-19:

  • ‘Book by Cadillac’ offers flexibility to choose luxury cars
  • ‘Fair’ offers flexibility within affordable cars
  • ‘Flexi Drive’ offers flexible monthly ownership
  • ‘Care by Volvo’ allows monthly ownership much like the Netflix model, closest to the one adopted by Maruti for the Indian market
  • ‘Canvas’ by Ford is a subscription model for used vehicles
  • ‘Borrow’ offers ownership to experience electric vehicles before purchase

‘Zoomcar’ is another rent-based subscription model that has gained immense popularity in Indian cities, where the idea is on shifting from car-owning to car-experiencing.

Shared mobility

Over the past few years, the concept of shared mobility has gained huge popularity in Indian cities, including app-based mobility services. Delhi alone has about two lakh app-based vehicles approximately.

A recent Deloite study shows that with flexibility in mobility options, 51 per cent of millennials have re-considered the need to own a car while 44 per cent of Gen-X were sceptical about owning a car today.

Subscription models is a vast shared mobility segment. It is expected to grow by a compound annual growth rate of 65 per cent at $9.15 billion from 2020-2024.

The segment provides the perfect opportunity for introducing a wider range of flexible ownership-models in order to prevent long-term commitment to a vehicle.

This is a move forward for driving the vehicle restraint narrative, the very idea about lesser on-road vehicles, moving or still.

It will drastically impact the growth of piled up vehicles, control the plying of older vehicles, ease scrapping end-of-life vehicles, keep a check on the unregulated market of older vehicles and hence regulate emissions from transport vehicles.

Minimising a long ordeal

The study Towards effective scrappage policy and infrastructure by Delhi-based Centre for Science and Environment highlights that old vehicles are an integral part of India’s vehicle market.

However, the quantification of volume remains a challenge. The Central Pollution Control Board estimated about nine million end-of-life vehicles to be on the road in the country in 2016. This number is estimated to increase to 22 million by 2025. This is almost equal to Delhi’s population today.

With limited land resources, our cities are already burdened with a lot of old and abandoned vehicles on the road, a usual sight around the lanes of Delhi’s residential areas. These vehicles don’t just pollute but encroach expensive land and act as heat trapping machines.

Another lacuna is that centralised vehicle registration data maintains a database for every new registration but not vehicles de-registered or due for de-registration. This is owing to a lot of factors including the time-consuming process itself.

It is indeed very common for me to hear from family and friends who procrastinate the process of de-registering older vehicles due to the time-consuming ordeal and choose to discard them otherwise.

On the policy front and for clean-air regulators, the problem of older vehicles is a complicated segment to address. Experts & agencies strive to bring innovative practices to address this problem.

In 2016, the Union Ministry of Road Transport and Highways announced a draft ‘Voluntary Vehicle Fleet Modernisation Programme’, a scrapping policy for older vehicles that is waiting to be approved for implementation.

However, the challenge is far beyond policy. It is about implementation with the lack of a database, the volume of vehicles, the shift of addresses, multiple ownership that increased multi-fold with time, etc. Additionally, the presence of informal scrapping centres makes it tricky.

An appraisal

Introducing regulatory changes is always challenging, coupled with concerns about acceptance / rejection, implementation, etc.

However, new practices are emerging and ideologies changing towards owning a vehicle. Controlled, ownership-based techniques where a segment of users sees vehicle ownership as a short-term practice can be a wonderful approach.

Having said that, it would be more flexible for users if the initial minimum lock-in period can be as small as three months.

With databases always being a concern, ownership through a single-window-approach such an OEM or third-party will make them a compulsory provision because the transaction will be linked only for a controlled ownership-period.

Nonetheless, it will also become crucial for cities to keep a check on the total volume of vehicles, to avoid a temporary spike in vehicles on the road or vice versa.

It will be wise to complement such an ownership strategy with regulating the annual number of vehicles on the road through quota-based registration. Such registration can be increased or decreased annually, based on other factors.

This might also prove to be a significant step in decarbonisation of the mobility segment, which is indeed the major source of ‘pollution exposure’ within residential areas.

Additionally, controlled vehicle growth will free up valuable limited urban land from being blocked by long-term parked abandoned vehicles. It will thus control end-of-life vehicles on the road.

From supply side regulation, implementation of scrappage policy or fuel economy transition, etc, can be centralised through limited stakeholders. It will enhance ease of transaction, convenience and manufacturer responsibility. Additionally, it will significantly save time in the process.

Not to forget, a shift to low-carbon modes is the ultimate sustainable goal. Flexible ownership can bridge the gap between consumer demand and sustainability. It is an emerging dimension in shared mobility.

Nevertheless, for everyone else, there is always an option for purchasing your own. A new challenge always pushes for newer strategies and this seems like one in the cart for now.

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