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Thursday, June 16, 2016

ZAP: Zoomcar to enter marketplace model!- Good or bad?

Update: Zoomcar seem to have beta launched this service, named ZAP (Zoomcar Associate Program)- FAQs are up on their website. At this point it is not clear what is the revenue share car owners can expect. But hope more details come up soon.

Self Drive rental agency Zoomcar is looking to shift to a marketplace model soon, to grow exponentially and earn profitability faster. (Read original news in ET)
MarketPlace for self-drive cars?
Flipkart started off as selling its own stuff in its early days but soon adapted to a market place model- sellers can list their products on flipkart, customers order on flipkart and product is delivered to customer under the name of flipkart. Flipkart provides the technology, platform, logistics and publicity and takes a cut from sellers on the business given to them. This enables flipkart to have unlimited number of items on its site compared to what it would have managed had it limited to its own products.

AirBnB is providing a market place for accommodations- those who have an extra room can list on AirBnB and when customers book, AirBnB takes a cut for providing the technology, platform and business to property owners who on their own find it very hard to to sell their rooms

Extending the same concept to cars, below is what we can probably expect:
It is not clear if Zoomcar is looking to aggregate small taxi players (ABC Travel n Tours with yellow board taxis)- like how Stay Zilla helps small hotel/homestay operators) or individual private car owners. (like how AirBnB helps those with an extra room). Taxi Drivers have already signed up for Uber/Ola and are minting money- but Zoomcar has added Zoom Chauffeur recently, so anything is possible. For rest of the article, I will assume it is the later. (private car owners will be able to rent their cars via Zoomar)

If you own a car but not using it frequently, you can list it on Zoomcar and set a rental price for it.  Whenever customers are looking for a car, if they like your car, they can book it and use it. From the rental charged, Zoomcar will keep a cut and pay you the rest, while you will be responsible for car’s maintenance, insurance and other well-being.

Benefit to customers if ZoomCar becomes a Market Place
  1. More choices. Today the type of vehicles are the ones Zoomcar has purchased and added to its fleet. With Market Place, anyone can add any car to the listing, so your choices are bound to increase
  2. With more cars available, rentals may go down
  3. Opportunity to try expensive/vintage/unique cars if they are added to the fleet
On the downside, reliability may go down. Today I have a fair idea of what models are available on zoomcar fleet, how old they are, which variant they are etc. With Market place, each car may have its own set of problems/issues/limitations which is very hard to know at the time of booking and may cause inconvenience.  (For example cheapest variant of Tiago gets only blower, not AC- you might have taken it for granted that all cars will have AC. Unless you cross check the variant or car owner declares it upfront, there will be disappointments)

Benefits to car owners:
  1. Earn from your car which would otherwise sit idle, costing in maintenance, depreciation and insurance
Factors to remember:
  • Rental cars will have higher maintenance expense, as customers may not care much for the car as they don’t own it. Underbody damages, strain on the engine etc could be high as customers only need to return the car without any visible physical damage and may not care to drive carefully in a way that ensures longer vehicle life. Particularly if you have premium interiors, expensive accessories these can get damaged in the hands of customers and their passengers.
  • Commercial vehicles attract higher tax and insurance. Self-drive cars will need a Yellow on black registration. Interstate fee also need to be paid for such cars. So unless you plan to part with your car for a much longer duration, the process involved may not be convenient/viable. Proper process and legal backing will be required for this marketplace model to cover scenarios such as accidents, usage of car for criminal activities, traffic violations and so on.
  • It remains to be seen what kind of incentives Zoomcar offers to car owners to be part of the market place. For example, Ola and Uber are offering lots of incentives for drivers to finish certain no of rides per day. If Zoomcar is willing to burn investor money and offer huge incentives even when cars aren’t making profit, then many car owners might be happy to make some moolah while the party lasts.
  • Most Indians have emotional attachment to their cars- they won’t let anyone and everyone drive their cars- not even friends and relatives, so letting a stranger rent your car take it to remote places etc has its own risks and drawbacks. Karnataka Government (and many other state governments) have come down heavily on bike taxis, have banned surge pricing etc. It needs to be seen how they will react to this model where private car owners get to list their whiteboard cars for commercial use (may be zoom will facilitate a conversion to yellow on black)
What numbers are we looking at?
Today, a 6 lakh rupee Ford Figo/Swift commands a weekend rental of about Rs 2000 per day (Excluding fuel, including tax). Demands are usually high during weekends. Assuming an average utilization of 15 days a month, a car can earn about 18,000 (Rs 1200*15) (I discounted Rs 600 towards various tax, Zoomcar’s commission, insurance and other handling expenses). This is about 2 lakhs an year. If you’ve bought the car on loan, it will take about 4-5 years to break even (after factoring interest to be paid, regular maintenance etc). Again this is very hypothetical. If car gets utilized more (say 20 Days+) or can command higher rent or if Zoomcar provides additional incentives, then break-even will be much faster. If you already have a car which is lying idle anyway then it is good deal to get it listed on marketplace.
Maruti Ciaz with all doors open
Indian Bloggers 
If Zoomcar Marketplace is to be active tomorrow and you have a car that you’re not using 20 days a month- will you list it on Zoomcar? Why or why not?

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