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This is why automobile giants are offering car subscription services

Winds of change are blowing through the Indian automobile sector. While technology is changing the engine-design, policy updates are encouraging manufacturers to be more environment and safety conscious and ride aggregating apps such as Ola and Uber have already changed the way people commute.

Mahindra

However, the strongest driver of change in this industry is consumer behavior. While car ownership in India is still considered a status symbol, problems such as congested roads, inadequate parking, volatility in fuel prices, high-interest rates, lack of credit history and rising insurance premiums are some of the reasons consumers are putting off their car buying decision. People are, instead of open to exploring improved public transport alternatives such as metro rail and air-conditioned buses and other shared mobility solutions. Thus, shifting a car purchase decision from aspirational buying towards need-based usage.

In the first ten months of FY 2019 alone, the top Indian cities have seen a lethargic growth in passenger vehicle demand. Delhi, Mumbai, Chennai, and Kolkata – the top four metropolitan cities that account for 11% of the country’s passenger vehicle market, witnessed a drop in the sales between 4% -12% from April 2018 to January 2019.

Amidst the shift in consumer buying decision process, the cogs of the traditional “buying or owning” are fast being replaced by “leasing” and to the latest “subscribing”. This newest trend of “Car Subscription” is gaining popularity, especially amongst the urban young middle class, where the needle has shifted from owning to experiencing; and subscribing a car makes the car ownership and driving easy and hassle-free.

Vehicle subscription is defined as a service where a customer pays a recurring fee for the right to use one or more automotive vehicles. So, how is this different from leasing out a car?

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