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Monday, July 14, 2014

Zoomcar Bangalore-Old vs New Policy-My thoughts

This post is again on cars- Click here to read Travel stories if cars don't interest you.

Last week Bangalore’s pure-play self drive rental company Zoomcars published a revised tariff structure. When I noticed it, my weekend was about to begin and I didn't have time to respond. Sunday night once I was back from the trip, I noticed that Zoom's members had almost raged a war against the policy change in general and the Rs 5000 deposit requirement in particular. in this post, I am comparing old and new terms and sharing my thoughts on Zoom's refined policy. 
#
Old
New
Pros
Cons
1
Security Deposit
Nil
Rs 5000
 -Simpler return process
-Refund may take time
-5k per booking at the time of booking itself, not during delivery
2
Min Rental duration
1 hour
4 hours
Reduced rental works cheaper
Not good for super short rides 
3
Hourly free kms
25
10
Reduced km limit compensated by reduced rent
4
Hourly rate
X
0.4-0.45X
More than 50% slash in hourly rate
Reduced kms
5
Daily Rate
Y
1.05Y
Minor increase in fares with 15 extra kms
6
Daily kms
225
240
Few extra kms at slightly revised rates 
If your usage by kms is not much, it is a loss
7
Tagline
Freedom of four wheels
Self Drive for the Self driven
  
Let us evaluate some of the above changes:

1. Security Deposit: As a long term self drive consumer, security deposit doesn't surprise me. I am used to paying Rs 30k to Rs 70k at Carzonrent as security deposit. Once Avis had blocked a massive 1 lakh on my card to give me Ford Endeavor. It is a practice world wide to block some amount or take a deposit.

Consider this- someone is giving you a car worth anywhere between Rs 5 lakh to 40 lakh, with an understanding that you comply with a set of guidelines and return the car in same condition as you took it. While driving in India, there are 100 things that can go wrong. There're many instances where members will have to pay extra- for excess kms or damages or other reasons. Now, understandably not every member pays this extra amount promptly and happily. Instead of spending energy on follow ups and recovery, I guess Zoom would have felt it more convenient to take a small deposit and refund the balance after deducting applicable charges. Zoom is now 1.5 years old, largely successful as a startup, has got good customer base and can afford to take a few tough decisions.

I noticed a few small differences: 
  • Carzonrent/Myles charge the deposit while collecting the car,but zoom charges it at the time of booking itself. 
  • If I am booking 1 month in advance, my money is blocked for whole month. 
  • If I have to book 10 cars on different days, I need to pay 5k each time.
While customers like me would be perfectly fine with the concept of security deposit, a large section of Zoom's customer base seem to be those who don't have a credit card or were attracted because of no deposit policy that hitherto existed. Zoom's USP all these days was that there's no deposit, which has now changed. Refund process can get delayed if banks are lazy. I have enough faith in the rental agencies and banking system, so I wait patiently while my blocked amount is released (except when I have another big ticket rental needing another 70k to be blocked), but other anxious customers can grow restless by each passing day, calling customer care frequently for their refund and getting restless if bank delays refund.

In the interest of rest of members, I suggest Zoom consider one of these alternatives, if they deem fit. I am sure Zoom will analyze member reaction, impact on bookings and other metrics and initiate corrective measures if felt necessary:
  • Consider taking a long term deposit of 5k, which rests permanently with zoom and deducted each time member has to pay extra. As this amount is exhausted, member needs to replenish this. Saves trouble of providing deposit separately for each ride and deposit refund headache.
  • Profile the customers- those regular customers who have prompt payment history, accident free return history etc could be waived off this deposit, while only new customers or those who have bad payment history could be slapped with this deposit rule. This helps avoid penalizing everyone because of few bad customers.
2. Minimum Rental: Earlier one could rent for an hour- now minimum rental is for 4 hours. (You can book for 1 hour, but will still be billed for 4 hours). This is good in some cases- for example, 1 week ago, I paid Rs 1300 to drive A Class for 2 hours, with 50km limit. Now I can rent an A Class for 4 hours for Rs 1100, with a 40km limit. This suits me well when my objective is to know the car better, do some photoshoot with it. I can spend more time in the car for less amount. But if I have to cover long distance, economics could be different.

But those who wanted a car for s quick ride could be disappointed (Example- you want to just drop off relatives at railway station- a call taxi could be cheaper than  4 hour zoom rental in some cases). On the other hand, if you want a car to go for a movie + dinner, new scheme is more attractive than earlier.
3.4. Hourly free kms and hourly rates: Reduced from 25kms to 10kms. But given that hourly rents are also slashed, net impact is still better than earlier. Example: Honda City: Earlier 1 hour, 25kms costs Rs 300. Now 1 hour, 10km costs Rs 125 + Rs 12 per km * 15km= 180, total for 1 hour/25km will be still Rs 305.

Advantage of the new scheme is that if your usage is less, you get to pay less.

Another advantage is that 24 hour rate is prorated into each hour. Earlier, if I wanted a car for more than 10 hours, it made more sense to rent for one full day. Now you can rent only for your duration of need, without feeling that you're being charged unnecessarily. If I want it only from Saturday morning 6AM till Sunday night 10PM - say some 40 hours- (my typical weekend in Bengaluru), I can rent it for just 40 hours and save a bit, compared to 2 days rent I had to pay as per earlier policy.

5.6. Daily rate and Daily kms: Is by and large left unchanged. A marginal increase, coupled with 15 extra kms is not much of a burden. But if you don't plan to drive 200+kms a day then you may feel it is little expensive. Also the daily rental with km restriction doesn't suit my ultra long drive usage. Last weekend I drove a Carzonrent Fortuner and covered 584kms in 24 hours flat. With Zoom's 240km limit, Rs 4200 in daily rent + Rs 15 * 344km= Rs 5160, I would have paid Rs 9360 for a XUV500. However, with Carzonrent, equivalent expense will be Rs 3200 rental + (584kms/12kmpl) * Rs 62.8 per litre =3056 , a total of 6256, about one third cheaper than zoom. I don't mind little inconvenience of fueling the car or giving a higher deposit, if it can save some money overall.

Pls note: I've used weekend rates in all illustrations. Weekday rates are much cheaper at Zoom.

Overall, Zoom has significantly reformed self drive car rental scene in India. People who weren't aware of this concept are introduced to it and competition which had neglected self drive wing were forced to revamp their self drive offering. Zoom still has the simplest process, wide range of new cars and except in few scenarios [Refer this post where I've compared Zoom vs Carzonrent], it is very economical to rent a car from zoom. 

I understand some of the new decisions like security deposit might attract some negative comment, but companies will have to take certain bold moves in long term interest of the firm. I am sure Zoom management has done enough due diligence before announcing the new policy. Over time Flipkart has comfortably increased minimum order value from Rs 100 to Rs 300 to Rs 500 for free shipping, without suffering any noticeable loss in business. I am sure same will happen with Zoom. Few reluctant members would eventually give in or the overall impact if any, wouldn't be catastrophic. Hopefully all ends well. Best wishes to Zoom.

Zoom has launched in Pune recently and also has revamped its mobile app. I am yet to try these two. 

Update: Zoom founders have communicated that they are working on refining the security deposit aspect of the new policy and we should expect some updates soon.

4 comments:

Sankara Subramanian said...

You have become like a auto expert :-)

Well written article and very helpful.

Shrinidhi Hande said...

Thanks Shankara

Lakshmi said...

Hi Shrinidhi - very informative blog. Please keep up the good work which helps people make Informed choices! :)

Shrinidhi Hande said...

Thanks Lakshmi

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