Navigating Sustainable Journeys: Riding The Wave Of Self-Driving Rentals In The Age Of EVs

With increasing concerns about the environmental impact of the automobile industry, EVs will be the way to go for India in the next few decades. The shift has already begun, with the domestic EV market in India projected to grow at a CAGR of 49% between 2022 and 2030. In a country accustomed to petrol cars, however, the transition will involve some resistance on the consumers¡¯ part.

As a solution, renting offers a good way to get used to EVs without having to purchase one upfront. In this lies an excellent opportunity for the still-nascent self-driving rental industry to lead the way for sustainable vehicle usage in India.

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For context, the self-drive car rental market in the US is worth $30 billion, while in India it¡¯s only $1 billion. The market opportunity, however, is a considerable one. 82% of the population doesn¡¯t own a car, and many prefer not to on account of high automobile costs and the hassle of maintenance.

At the same time, cars are often the only feasible option to get from point to point, as public transport isn¡¯t always available. So far, consumers have made do with chauffeured services like Ola and Uber - a market worth $15 billion. However, that still relies on an external service, which means it cannot always be banked on - plus, instances of chauffeurs refusing ride requests or behaving poorly are on the uptick. With self-driving rentals, consumers have the advantage of a vehicle that¡¯s in their control, while avoiding the costs of owning a car.

At the same time, electric vehicles offer a low-cost and efficient alternative to regular cars for both rental players and consumers. For rental players, electric vehicles are inexpensive to maintain, which means they can rent them out at lower rates and thus boost their uptime, which means higher profits. Hertz has already explored this model in the international market, signing a deal with Tesla for 10,000 cars. For consumers, it¡¯s far cheaper to charge an electric car than it is to fill up a tank with petrol, and EVs offer a comfortable, luxurious experience that appeals to the modern consumer. Electric two-wheelers and three-wheelers have already become popular choices for autorickshaw drivers and delivery executives - they¡¯re easy to operate, inexpensive to charge, and the obviously better choice for the environment.

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When one considers these trends together, there¡¯s a clear opportunity for car rental players to capitalise on both. As an emerging sector, rental players are yet to make too much of an investment in petrol cars - now, they can skip that step entirely and invest in EVs. This will make them a sustainable option from the get-go and offer a doubly appealing option for modern consumers who want an easy way to get around without spending too much.

Running a self-driving rental service of any kind involves a massive capital outlay - maintaining a fleet of vehicles in every city where the service is present. The first step, therefore, is for rental players to attract investment from major automobile companies like Hyundai, Indus Motors, or Mahindra. Secondly, rental players need to have a plan to expand to rural areas, where the majority of the population lives.

This includes maintaining vehicular fleets in smaller cities and towns, and also investing in EV charging stations that are easily accessible. Thirdly, much of the hesitation around renting self-drive cars comes from a lack of understanding about how the booking systems and the tariffs work. Rental companies should thus adopt a ¡°phygital¡± mode of communication wherein customers can book through apps as well as over the phone, along with easy tariff structures and flexible booking terms.

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Finally, as a long-term measure, rental players should initiate and lead conversations around how to sustainably manufacture lithium batteries, which power EV vehicles. Given that mining practices in India are often unsafe and environmentally harmful, this is key to ensuring that the EV movement truly does have a net positive impact on the environment.

There¡¯s a lot of optimism about the EV market in India - by 2030, annual sales are expected to hit 10 million. Self-driving rental players can capitalise on this by offering an affordable, risk-free way for Indians to experience the EV difference. So far, the self-driving rental space has been concentrated in Tier-1 cities, which means there¡¯s a natural opportunity to expand to the rest of India. And while the growth journey may be more gradual compared to the rest of the world, we¡¯re confident that the results will ultimately be worth it for both the economy and the environment.

The author is founder of IndusGo, a self-drive car rental company in South India. The views expressed in the article are author's own.