Covid-19 impact: Inter-city bookings take a beating for car rental firms

As the Covid-19 outbreak has companies increasingly asking their employees to work from home, commute and non-essential travel have come down drastically. This, in turn, has resulted in a dip in the self-drive car rental business in India.

There is a 10-15 per cent drop in the inter-city demand in March alone, vis-à vis-February, said Pulkit Ahuja, National Head, MyChoize Car Rentals, which has a presence in 20 cities across the country. The business coming from airports particularly has gone down in the last couple of weeks, he added.

Over 23.8 million people in India use car rental services, per data from online statistic portal Statista. Car rental companies purchase or lease vehicles and rent them to customers by the hour, day, week or month, with or without fuel, according to their preference, for a fee. The price varies from company to company, depending on the city and location.

Travel advisory

“We have witnessed a drop in inter-city bookings due to the advisory against non-essential travel,” said Ashwarya Singh, co-founder and CEO of Drivezy, one of the top 10 funded car rental start-ups in India. He added that the company’s revenue in the car and bike rental segments has declined 15 per cent and 8 per cent, respectively.

The bookings for private use vehicles are mostly made on the company’s website or mobile app.

Data from Tracxn, a firm that tracks the investments and financials of start-ups and private companies, reveal that there are nearly 53 active self-drive car rental companies in India.

Sandeep Gambhir, Managing Director and CEO of ORIX Auto Infrastructure Services, a business-to-business (B2B) car leasing and rental company, said its bookings have come down 40-50 per cent in March alone, across all locations in India.

“We happen to service large corporates and most of them have either restricted or virtually stopped all domestic business travel,” he added.

There is no incoming traffic from foreign travellers visiting corporates any more, Gambhir said.

Intra-city bookings have stayed stable because of customers choosing to rent a car over using public transport. Drivezy’s Singh said customers are increasingly opting for long-term subscriptions (30 days and above), which allow them to have the same vehicles for a longer duration, thus bringing down the chances of infection.

What lies ahead

While these companies are bringing about measures to ensure as much safety as possible — ranging from disinfecting vehicles after every trip to ensuring the drivers who deliver cars to the customers wear masks and gloves — their businesses continue to grapple with the slowdown.

“We see this continuing for a couple of weeks. We are already down to a bare minimum, frankly,” said Gambhir. “Whatever is needed to keep things running is what is happening right now,” he added.

With social distancing becoming the norm and the public increasingly opting to not travel until the spread of the virus is contained, how will this fall in bookings change the outlook for the self-drive car rental companies this year?

“The demand is at its highest during April, May and June,” said MyChoize’s Ahuja. If India manages to curtail the spread of the virus through effective social distancing, as is being tried by the government, there could be a sharp V-shaped recovery in demand in these months, he added.

Drivezy’s Singh said the revenue shock should not impact their growth plans if the outbreak is contained in three months.

“However, we may have to put our expansion plans on hold if the infection continues to spread. In the worst-case scenario, we may see a 40 per cent drop in our projected revenue in FY21,” he added.

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