OEMs Like Tata Motors, Maruti Are Betting On Car Subscriptions, But Indians Are Still Hesitant

In 2020, at the height of a global pandemic, entrepreneur Sakshi Vij’s self-drive rental platform, Myles, launched a car subscription service. It was a bold move, and risky too, but it worked out. “We got a lot of attention from vehicle manufacturers who were then looking for innovation to be able to sell better,” Vij told The Core.

At a time when India’s auto industry was facing significant supply chain disruptions and production halts, Myles tied up with Maruti Suzuki, Toyota, MG Motors and others. Since then, the number of cars featured on Myles for subscription has grown by 20-25% annually. They now have 200 fleet partners who list their cars on the platform. Car subscription contributes to over 70% of their business. 

Rather than buying the cars, Myles works with fleet operators, original equipment manufacturers (OEMs), leasing companies and other financial services who purchase cars and put them up on its platform. 

The idea behind launching car subscriptions was to offer easy access to cars. Car subscriptions are a lot like leasing but for personal use. Subscribers pay a monthly fee for a certain period (mostly 2-4 years) for using a car. Globally, the subscription model already has a lot of takers and it is being pegged as the next big thing in India. Mobility as a service is a “key theme” expected in India in the next five years, EY India’s future of mobility leader Som Kapoor told The Core

A younger demographic, aged between 25 and 40, is likely to be the ones adopting car subscriptions, according to Deloitte’s 2024 Global Automotive Consumer Study. India had the largest number of respondents (67%) interested in ditching vehicle ownership for the subscription model. Respondents surveyed were aged between 18-34. 

Despite this outlook, the actual penetration of car subscriptions currently is very slim. While there is no concrete data, Vij pegs the subscription market in India at about 35,000-40,000 cars. This is barely 1% of the Indian car market, where, on average, 40 lakh cars are sold annually. Indian consumers are still hesitant to adopt the trend for several reasons, including limited awareness, imposed restrictions such as distance caps, and because car ownership is still aspirational in India. 

What Is Car Subscription? 

Think of it like renting a house. There isn’t much difference between personal car leasing and car subscription in India, said Suvajit Karmakar, country managing director of the Indian arm of French car leasing company Ayvens. There are two types of leasing: operational, where you pay a monthly fee until the end of the contract, and financial leasing, which offers the option to buy the product at the end of the term for a pre-decided cost. 

While corporate car leasing works on the financial model, personal leasing and subscriptions are based on the operational model. In most car subscription models offered in India, a monthly subscription fee includes maintenance, repair, and insurance. This means the leasing company takes care of servicing or maintenance of the car, or in incidental cases such as breakdowns. For instance, Ayvens offers a 24-hour emergency breakdown service in a 100 km periphery of the user’s residence.  

One can subscribe to a car directly through the OEMs offering the service, or through third-party platforms like Myles, Ayvens, Orix, and Revv. Most OEMs have partnered with one or more of these third-party platforms. Both Karmakar and Vij said that most of their business comes through these partnerships and not directly. 

Car subscriptions have been around for some time in India now. Car rental company Revv, which was launched in 2015, started offering subscription-based services in 2018 following an investment by Hyundai. Ayvens started offering private leasing services in the country around seven years ago and launched its pre-leased subscription programme Ugo Subscribe in 2020. 

Among OEMs, Hyundai and Mahindra & Mahindra started subscription-based services in 2019, and Maruti Suzuki introduced its subscription product in 2020. Tata Motors launched a subscription option for its best-seller, the Tata Nexon EV. Betting big on the trend, Mahindra Finance launched its leasing and subscription business Quiklyz in 2021. 

While Hyundai’s cars are still available on several third-party platforms, a Hyundai spokesperson told The Core that the company does not offer subscription services anymore. 

Industry players and observers expect car subscriptions to become more mainstream in the next five years. Vij said that she expects around 10-15% of the Indian car market to switch to subscription-based models towards the end of the decade. 

“Currently, subscription is basically looked at from a taxation [benefit] perspective,” Kapoor said. However, he added that in an evolved ecosystem like Europe, people want a three-year car rotation, they don’t want the hassle. In other countries, like the UAE, car subscriptions are on the rise as lifestyles become more flexible. Consumers are increasingly more cautious about sustainability, and car subscription and rental companies are putting an effort into that.  

The global car subscription market crossed US $5 billion in 2022, and is expected to cross US $100 billion by 2032, growing at a compound annual growth rate of 35%. Europe currently dominates the global market, accounting for a third of the volume, followed by North America. According to a 2023 Deloitte report on the future of automotive mobility, vehicle use without ownership will make up 57% of the Europe market and 38% of the US market by 2035. 

What’s In It For Carmakers And Consumers? 

Car subscriptions are perfect for a generation of Indians who want a car but don’t want the hassle of taking care of it. The flexibility of subscription models is geared towards a younger, more mobile demographic. “We are primarily seeing young urban professionals in metros and tier one cities in the age group of 25-45…these are individuals at an age group where their growth in income is the highest,” Vij said.

The flexibility to upgrade your car every two to three years, without worrying about a depreciating asset, is also a key selling point. There is no down payment required, although the subscription fee and the monthly EMI on a car loan are often the same. 

For instance, the on-road price of a Maruti WagonR LX 1.0L petrol car in Delhi is Rs 6.06 lakh. If you were to opt for a 4-year subscription plan for the car, Maruti Suzuki Subscribe offers the car through its partner Quiklyz at Rs 13,090 per month. If you were to buy the car, the down payment would be about Rs 61,000. Assuming a loan interest rate of 8.5% and a similar 4-year tenure, the monthly EMI would be Rs 13,442.

However, this can change when factoring in the cost of maintenance and resale value, which decides the leasing fee for a car. Two cars from different companies costing the same can have different maintenance costs and resale values. The higher the cost of maintenance, the lower its resale value and the more the leasing company will charge you for it. 

A car could have a much lower lease rental because it has a better resale price and a lower cost of maintenance, whereas a car loan for a car costing Rs 10 lakh will be the same regardless of the brand, Karmakar pointed out. 

Car subscriptions can be advantageous for carmakers too, allowing more oversight on servicing being conducted at authorised centres and helping retain customers. Changing consumer behaviour during the pandemic — lowered buying sentiment for cars and demand for flexible alternatives — led car manufacturers to foray into subscription services. In a 2020 interview, Hyundai India’s COO Tarun Garg, then director of sales, marketing and services had said that there was a good chance that users would opt for subscription plans over buying a new vehicle in the post-Covid market. 

Slow Going

While car makers are venturing into subscriptions, the number of takers have been minimal. 

Maruti Suzuki announced last month that it had hit 10,000 subscribers on Maruti Suzuki Subscribe, its subscription offering, with most users based out of Delhi-NCR, Mumbai, Hyderabad, Chennai, and Bangalore. Over 50% of them were acquired in FY2023-24, the company said in an official release. The company, India’s largest car maker by volume, offers subscriptions through five partners. 

Karmakar told The Core that Ayven’s pre-leased car subscription offering accounts for less than 4% of the company’s total monthly volume. “Most of the business comes from the corporate leasing that we do,” he said. Another product that the company offers through corporate clients — which is like private leasing but for employees of select companies — contributes to 30% of the company’s annual revenue, he said. 

A 39-year-old user from Bangalore, who requested anonymity, has been leasing a Tata Nexon EV through his company since 2022. He signed up for it during the pandemic, since wait times for a new car were too long, and he was reluctant to use public transport. “And I regretted not doing it earlier,” he said, touting the income tax benefits the corporate lease offers him. He also had an option to pay a set price at the end of the lease term and buy back the car, which he opted for. 

But would he have opted to lease a car directly? No. “I was interested in that as well, when I was considering this… I did some research on subscribing to a car via Quiklyz, but I wasn’t getting the same financial benefits I am getting now,” he said. Without that, it didn’t make sense for him.

There are other factors hindering car subscriptions from taking off in India. Most subscription companies offer both new and pre-leased models at different prices. With pre-leased models, the performance can be affected. This shouldn’t be a problem, since the company also covers the maintenance and repair costs, but some users have complained of service issues. 

A US-based user, who also requested anonymity, said that he had opted for a short-term subscription of two months from Revv when visiting India last August. However, the Maruti Swift had already clocked 95,000 km when he got the car, and there was a lot of damage.  He struggled to get issues resolved with the company’s customer service. 

Cars in the subscription model also come with a kilometre cap, starting at 10,000 km and increasing according to the plan a user chooses. If a user goes beyond this, there are extra charges. This, and the lack of freedom to customise the car, can also be deterrents. 

Several potential car owners that The Core spoke to also pointed out that they would much rather own a car if they could afford to pay the EMI/rental fee. “Cars, like homes, are still very aspirational in India, there is a lot of value associated with this,” a 31-year-old Mumbai-based CA told The Core

Car companies aren’t very confident about pushing the subscription model yet. “For any financial product to actually grow it’s very important that the OEMs actually become serious about it,” Karmakar said. Kapoor of EY India echoed this. “I think a lot of the main players still offer it like a third party service. When they come and do it in-house, from their own stables, that’s when I see a true uptick to that business,” Kapoor said. 

The Core reached out to Tata Motors, Maruti Suzuki, Mahindra & Mahindra and Volkswagen, as well to platforms Revv, Orix and Quiklyz with queries but did not receive responses at the time of publishing.  

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