Mahindra predicts shift from car ownership to subscriptions post COVID-19

At a time of economic uncertainty, the pay-as-you-use subscription model could help customers minimise financial commitment as compared to car ownership.

Published On May 18, 2020 12:20:00 PM

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Mahindra subscription allows a customer to take home a new vehicle without hefty down payment
In lieu of a monthly fee, customer has full access to the vehicle
Subscription model could help reduce financial commitments in uncertain times

As the world begins to come to terms with the wide-ranging implications of the coronavirus pandemic, major players in the automotive industry are learning to adapt to new market conditions. With social distancing becoming the norm, most companies are realigning their strategies by introducing digital sales platforms for contactless customer interaction. In addition to such a transition in the buying experience, home-grown automaker Mahindra further believes in the increasing potential of a ‘pay-as-you-go’ subscription model, vis-à-vis vehicle ownership, which could help bring back demand in a beleaguered marketplace.

In a recent #LiveWithAutocar session on Instagram, Veejay Nakra, CEO, automotive division, Mahindra & Mahindra, commented, “About six months back, we launched our subscription model. It offers a ‘pay-as-you-drive’ experience. That is something that we are going to promote very strongly, and that’s going to create a lot of upside towards getting people back to personal vehicles."

Offered in partnership with car rental service Revv, Mahindra subscription essentially allows a customer to take home a brand-new vehicle of his choice, without the need of a hefty down payment. In lieu of a monthly fee that includes the cost of insurance, road tax and maintenance, the subscriber has full access to the vehicle for a tenure that starts from a year and extends all the way up to 48 months.

Once the tenure is over, the vehicle goes right back to the subscription company, thus eliminating the hassle of resale. If one wishes to continue ownership further still, the car can be purchased at a residual market value. The customer has an added benefit – the flexibility of swapping to a different model altogether, with a revised monthly fee.

For those operating on a tighter budget, Mahindra also offers subscription to pre-owned cars. Then there is the choice of opting for just a few months of ownership, instead of being tied down to a minimum one-year lock-in period under the annual subscription plan.

Moving forward, Nakra believes in the need for business models to be dynamic and adapted to better suit different market segments. "Gone are the days where any OEM (original equipment manufacturer) can have one sweeping strategy to say that this is its channel strategy and consumer interface strategy. All of that has gone out of the window and been set to zero," says Nakra.

With the relaxation of lockdown measures, the carmaker foresees light commercial vehicle (LCV) sales returning faster than other segments, primarily due to an uptick in rural consumption. In the personal mobility space in urban areas, however, Nakra expects “a little more time for normalcy to return". And this is where the subscription model could give a fillip to demand.

Nakra feels that in these difficult times when saving cash is the order of the day, consumers won’t want to fork out a big chunk of money for a car (even if it’s for a small down payment) and will find a subscription offer more attractive. “Subscription minimises financial commitment from a customer and affords him the opportunity to drive a vehicle of his choosing, even if an outright purchase is not on the cards in such periods of economic uncertainty,” he says. The value offering could prove to be sufficient for tipping potential buyers into bringing home a new set of wheels and boosting demand, especially at a time when there is already an expected shift away from public transportation towards personal mobility.

Like with every other automaker, the nationwide lockdown has had a severe impact on Mahindra, resulting in zero domestic sales in the month of April. With the government providing conditional leeway in restrictions, the company is now looking forward to getting its production and sales channels back on track in the coming weeks.

Also see:

Mahindra introduces ‘Own-Online’ digital sales platform