As the growing domestic tourism market combines with improved infrastructure and increased awareness about privacy among travellers, India's self-drive car rental sector is poised for significant expansion over the coming years, says Zoomcar’s CEO Hiroshi Nishijima.
20 Nov 2024 | 6560 Views | By Kiran Murali
As personal car ownership becomes increasingly expensive and inefficient, self-drive car rental services are gaining popularity in India for long-distance travel. With significant improvements in road infrastructure over the years and a surge in domestic tourism, many people are opting for self-driven road trips to their holiday destinations. Given the ...
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As personal car ownership becomes increasingly expensive and inefficient, self-drive car rental services are gaining popularity in India for long-distance travel. With significant improvements in road infrastructure over the years and a surge in domestic tourism, many people are opting for self-driven road trips to their holiday destinations. Given the rising costs of chauffeur-driven services, including driver expenses and return trips, and privacy issues, many see self-driving car rental services as a more convenient option.
Bengaluru-based Zoomcar is a pioneer in India's self-driven car rental space. Through its platform, the company offers a self-drive car rental service that allows users to hire cars on an hourly, daily, weekly or monthly basis. While the company has been grappling with severe cash shortage, high debt and losses, the Nasdaq-listed company's interim Chief Executive Officer Hiroshi Nishijima says Zoomcar remains committed to familiarising the concept of car sharing in the country with the addition of new vehicles and users to its platform. He noted the market has the potential for multi-fold growth by the end of the decade.
Zoomcar, which reported $9.9 million in revenue in the previous financial year, has set a target of almost doubling the turnover this year. The company is banking on improving its supply network with an addition of almost 20,000 new cars by the end of this financial year to cater to the robust demand. The average revenue share that Zoomcar receives from a booking on its marketplace is approximately 40%, with the hosts retaining the remaining 60% of the revenue.
Here are the edited excerpts from a recent interaction with Nishijima where he shared his thoughts on the car rental market, challenges and the company's international expansion plans:
How mature is the car rental business in India? What are the major factors that support it?
The car-sharing market is a part of the broader car rental market. In India, the primary mode of car hiring is a car with a chauffeur. That is the biggest market. According to third-party surveys and statistics, the broader car rental market is around $4 billion. Car sharing or self-driving modes, where cars come without a chauffeur, account for less than 10% of the broader car rental market.
But it is the fastest-growing segment. Ten years ago, there was no market, and now it is one of the fastest-growing segments, though it is still niche. People are travelling much more frequently post-COVID, and the domestic tourism market is growing quite fast and steadily, by around 5-10% per year.
Secondly, the variety of choices for consumers in terms of vehicle models, powertrains and transmissions has completely changed over the years. Because of this availability of choices, people are basically enjoying the fun of driving. People are very much enjoying self-driven road trips to tourist destinations during their holidays these days.
In addition to these two factors, privacy is another major factor that is driving the growth. When people travel with their family or friends, many prefer more and more to drive without a chauffeur, or unknown drivers, these days. They are also more comfortable with 2-3 days of travel, and they find it convenient when driving in tourist cities, especially where there are no traffic jams.
What kind of growth do you see in this segment? What is going to be the company's strategy?
Looking at other countries, the self-driving trend should continue to grow in India as the income level of the middle class grows and infrastructure improves. Every year, we should see growth in double digits, and then if that is continued for 10 years, the market size itself will easily triple or quadruple.
We are not very bothered about how much the market is growing. Zoomcar is just focusing on how to make this car sharing, peer-to-peer car sharing, a concept that is very familiar, popular and seamless to people across all parts of the country.
Zoomcar's car-sharing platform is the largest in this country. We have 25,000 vehicles registered on our platform and more than 10 million users. Surprisingly, around 40% of our users own vehicles. So they use our platform for hiring cars when they occasionally travel to other cities for a short stay, or going for a holiday on long weekends. Also, 15% of the people who have registered their vehicle on our platform use the services when they travel to other cities once in a while.
Meanwhile, we are also looking to expand our service to provide luxury vehicles on our platform. We would like to create a dedicated category for luxury vehicles on our platform.
What are the major challenges in the self-driving car rental space?
The major challenge we are seeing in the car-sharing business on the supply side is getting more hosts or people who register their vehicles onto the platform. The vehicle is the second most important asset for people after home. Sharing that vehicle with someone whom they do not know is a huge concern for them. This trust factor is the biggest challenge, both mentally and culturally, from our point of view.
We are working to improve the host's trust, removing all their concerns and making sure guests reconnect to the host in a safe and verified way. On the guest side, when we purchase a vehicle, we spend days and weeks getting the information, like whether we should buy an automatic or manual transmission, and test it. That sort of decision-making process is seen in car-sharing decisions as well.
The availability of a variety of choices helps us grow the car-sharing market. But on the other hand, from the guests' point of view: I have so many choices, 25,000 cars on the platform. How should I narrow down the list in a short time, how quickly can I make a purchasing decision? So that is the challenge for the guests.
So there are unique challenges on both the host and guest side. We are using technology to mitigate the challenges.
How are you using the technology to resolve these challenges?
We are investing heavily in artificial intelligence. We have done a beta launch of a generative AI assistant, available to select hosts. The AI assistant is designed to provide 24/7 support, guiding hosts through every step of their journey, from seamless onboarding to understanding the platform and safety of their vehicles, and also maximising their earnings. Apart from a direct human interface, we have smart FAQs that help address their queries such as those related to the safety of cars, and how earnings reach bank accounts outside working hours. AI will become a personal assistant to the host in the second stage, giving them suggestions on what they need to maximise their earnings by optimising the process.
On the guest side also, generative AI will play a crucial role in helping them make the right purchasing decision. One guest usually takes 7-9 days to make a purchase after multiple searches. We are trying to help them shorten the time taken for deciding on purchases. We will roll out a GenAI assistant for guests, offering personalised, curated suggestions for selecting the most suitable vehicle for their trips based on their needs. This assistant will also provide comprehensive summaries of the last few bookings and the experience of previous guests.
What are your plans for expanding Zoomcar beyond India?
While our focus right now is on India, we strongly believe that many other emerging countries are in a similar situation - where domestic tourism is growing, car models are diversifying and privacy is becoming a stronger concern for their domestic tourism. So this peer-to-peer car-sharing concept will become a majority in many emerging countries. Our aspiration is always global, focusing on emerging countries.
A few years back, we launched a beta version of our platform in markets like Egypt and Indonesia. We tested it there at a small scale from the point of view of the market, regulation and managing remote environment. We changed the product's architecture to meet global customer requirements, and it worked.
We stopped the beta programme sometime back but will be looking to expand our business to emerging markets, depending on our priorities. Southeast Asia, the Middle East and North Africa are the markets where we see some scope.
The app is ready to be launched in multilingual format in different locations, with customisation based on local regulations and customer needs. It is not very capital intensive; the only capital we need to launch in other countries is the initial marketing and launch expenses. Marketing budgets can be flexible. So, we can start at a small scale, or at a huge scale nationwide. It is all on us.
For the next six months, we are laser-focused on India. After that, depending on opportunities and priorities, we may decide on the expansion plans.
By when do you expect to report profit again?
Our previous year's financials were pretty good in terms of both turnover and bottom line. We have been significantly reducing our bottom-line loss over the quarters. We are very close to being in a profitable situation. Even the five-hour short duration bookings are contributing positive margins. We are able to make a profit from every single booking. We would be profitable quite soon; it will not take us years to be there.
Also, we are not too focused on profit at this point, but of course, we do not like inefficiency. So we still want to be efficient, but cutting costs here and there is not our focus. Our focus is more on providing the best customer service. Ours is a platform and we have fixed costs. It is not capital-intensive items such as vehicles, land or parking spaces. Human capital is our only investment. We have a very lean, efficient, and a quite strong smart team, and that is where our fixed cost is. As transaction volumes go up, we will cover all the costs in India.