Zoomcar Authors: Nikhil, Yatin Goel, Pooja Yadav, Priyesh Mummiidi

INDIAN INSTITUTE Of MANAGEMENT RAIPUR

Zoomcar is a self-drive car rental company headquartered in Bangalore, India. The company was founded in 2013 by David Back and Greg Moran. As of April, the company operates in 45 cities across the country. This membership-based service gives individuals the leverage to hire cars by the hour or by the day, and reservations for the same can be made through ZoomCar’s website or its mobile app.

ZoomCar has positioned itself exclusively as a self-drive car service. At present, Zoomcar offers more than 20 models – including hatchbacks, sedans, SUVs and luxury cars. Metros and non- metros contribute 80% and 20% to the entire business respectively. The company boasts a workforce of over 200 employees. With ZoomCar, your hiring experience is hassle free as the tariff always includes free fuel, insurance, and taxes. And even though, a refundable deposit is charged per trip, but if you’ve done multiple bookings then you can forego the deposit entirely!

History and Timeline December 2012: Friends Greg and David Black, who studied together at the University of Pennsylvania, ad came to India to start up a business and zeroed in the idea of Zoomcar. What they noticed that was – India lacked any short-term car rental services. They believed that India was the perfect developing country where this could be implemented. Research further showed that launching a service like this in India was very tough because of three reasons— a lot of capital was required, there was high vehicle damage on Indian roads and the regulatory approvals are tedious. Since no player was offering a similar service, Greg strongly believed that ZoomCar automatically would receive the edge and because of its fundamental uniqueness, his idea had the potential to click in India! January 2013: With the tie-up with Ramesh Tours and Travels, Zoomcar launched operations in 2013, and began with a few cars from Mahindra & Mahindra 14 February 2013: Zoomcar kicked off with seven Ford Figo’s and Mahindra Scorpios in Bengaluru.

May 2013: Zoomcar shot to the limelight as it raised about $300,000 from former US treasury secretary and professor at Harvard University, Larry Summers. 50 cars in Bangalore October 2013: The company raised another million dollars from New York-based angel investor group Empire Angels, San Francisco-based venture capital firm Funders Club, Basset Investment Group and former US Securities and Exchanges commissioner Lady Barbara Judge among others. November 2013: Zoom, Uber, and the Ashoka Foundation launched a month-long campaign in Bangalore called RideSmartBLR to encourage car-rental and discourage drunk driving for its health, economic and environmental benefits March 2014: Zoomcar raised another $1.5 million from existing investors and some angel investors from Dubai, which gave the company the firepower to branch out to Pune, with 25 vehicles. A multi-city presence was necessary to get a venture capital firm on board. October 2014: Sequoia Capital, along with former Infosys chief financial officer (CFO) T.V. Mohandas Pai, Abhay Jain, head of corporate affairs at Manipal Group, and the existing investors pooled in $8 million. April 2015: Quick expansion followed. The company launched in Delhi in December, followed by Mumbai, Chennai and Hyderabad in quick succession. July 2015: The next round of funding happened when Sequoia Capital and Nokia Growth Partners invested about $11 million. Moran claims that by then Zoomcar was clocking monthly revenue of more than Rs5 crore, with its fleet of 1,300 cars. August 2016: Investment worth $24 million raised through round led by Ford Smart Mobility LLC, a unit of Ford Motor Co., and existing investors Sequoia Capital, Nokia Growth Partners and Empire Angels. December 2016: Zoomcar raised funding from Chinese VC firm Cyber Carrier CL, October 2017; Zoomcar launched a cycle rental service PEDL in the country, starting with Bangalore, Chennai and Kolkata. The company claims, that in three months PEDL has a fleet of 3,000 cycles in 8 cities and has completed more than 4 lakh trips till date. The company also added that PEDL plans to add 5 lakh cycles over the course of 2018 across 50+ cities. November 2017: Zoomcar entered into a partnership Mahindra Electric Mobility (MEML) to roll out electric vehicles in Mysore, Karnataka, and Hyderabad. The company had said that it plans to install more units at key locations, and intends to replicate this model in Chandigarh, Delhi soon. These vehicles can be hired by residents and visitors in the city. February 2018: The firm raised $40 million in a Series C round led by Mahindra March 2018: The company earlier launched a one-way intercity service called Hop where a customer can pick up a car from a location from one city and drop it off to another city at a Zoomcar location. Earlier, customers had to return to the city of origin to drop the car off.

The company has 2,200 cars from manufacturers such as Ford, Mahindra, Maruti and Tata running across Bengaluru, Mumbai, Delhi, Pune, Chennai, Hyderabad and Chandigarh. Moran says Zoomcar will have more than 25,000 cars across 25 cities by 2018. The next big move will be to launch operations in tier II/III cities in the next 12 months. In April this year, the company launched an associate programme, encouraging people to attach their cars to Zoomcar, signaling a shift to the marketplace model. Moran says the company will look at scaling up the programme to account for about three-fourths of its fleet in the next 12 months. Under this programme, Zoomcar will retain 30% of the transaction value.

As of date, ZoomCar offers a rough fleet of 6000 vehicles spread across 9 cities including: Bangalore, New Delhi, Gurgaon, Mumbai, Navi Mumbai, Hyderabad, Chennai, Pune and Chandigarh, that are available for pickup from one of their 24 locations. With 2100+ Rides Daily, 870000+ Happy users, 110000000+ Kms Travelled (enough for 143 round trips to the moon!), ZoomCar at this point accounts for 60% market share and is known to be the largest name in the sector!

Competition and Competitive Dynamics

Utilizes the sharing economy concept which is defined as a peer-to-peer based activity of acquiring, providing or sharing access to goods and services often facilitated by a community based online platform. ZoomCar identified the gap in the Indian market with no players at their time of entry in the self-driven rental car market and high percentage of idle private vehicles. ZoomCar found success due to the timing of its entry in the Indian market with the rapid development of technology with regards to accessibility of mobile phones along with high speed internet access that could support such an online platform in conjunction with the willingness of the Indian consumer to adopt and try such a new product offering. ZoomCar enjoyed the first mover advantage in this space and overcame their initial hurdles using strategic alliances with local operating owners and sub-leasing cars and were able to purchase their own within a year. The value proposition that ZoomCar provided was a “Do-It- Yourself” rental model with a wide range of options to pre-select a car overcoming existing challenges of bargaining with local car agencies which enjoyed a monopoly until then. The most significantly impacted entities were these local agencies that were price makers, however, with the transparency offered by ZoomCar with regards to the individual components of the final price and costs associated with any unexpected damages to the vehicle, they have quickly become market leaders. As of today, the Indian landscape only has a few players in the organized self-drive rental industry such as OLA Rentals, Myles and Uber Hire but given the lack of regulations and burgeoning neo-Indian population which represents a huge untapped market, it is expected that there will be several start-ups in this space which may result in a price war. Hence, for ZoomCar to sustain its customer base it must focus on improving the customer experience and overall satisfaction levels by constantly innovating their application and increasing the ease of rentals.

Business Model

We shall assess the business model employed using the following framework:

Zoomcar, for the uninitiated, is a self-drive car rental service that allows users to rent cars by the hour, day, week or month. It offers a membership-based service that enables individuals to rent vehicles on an hourly or daily basis. Currently, it has a fleet of over 3,000 vehicles that collectively cater to more than 2 Million registered users across the country.

Zoomcar reported a positive EBITDA, uncommon for such businesses primarily attributed to adoption of the marketplace model in conjunction with reliance on organic growth with conservative spending on marketing well below 10% of total revenue.

The traditional approach of an inventory led business was seen in the early days of Zoomcar too is capital intensive with underutilization of capacity and a number of other ancillary costs such as inventory forecasting tools, management and logistics. However, the marketplace model allows firms to circumvent these problems by passing on the burden of product offerings to the suppliers participating on the platform.

Given that this is a multisided platform the challenges associated with reaping the benefits of network effects associated with scale of operations increases as it requires a level rate of adoption on both sides. In order to meet growing demand, Zoomcar launched ZAP, a peer- to-peer (P2P) marketplace for car sharing. Through the platform, individuals can purchase one or more vehicles as well as lease the vehicles to Zoomcar and earn money. This asset- light platform, currently contributes to over 25% of Zoomcar’s inventory with around 800 cars. Zoomcar takes a commission of 30% from the total revenues of the car, and also provides a minimum payment of 3% of vehicle ex-showroom price to ensure baseline level of repayment. The other 75% of its cars are acquired through loans from banks, while the remaining cars are leased from large companies like Avis Budget Group.

Zoomcar has managed to become EBITDA positive through a holistic, self-sustaining approach. By expanding its product portfolio across multiple verticals like bicycle sharing and electric vehicles, the self-drive car rental company has been quietly expanding its reach, while also accelerating its revenue growth.

Since this is not an example of disruptive innovation, one would expect stiff competition and would advise Zoomcar to proactively pursue new avenues to expand the business and differentiate its product offering to build reputation and loyal customer base.

Target Audience

Till now, the target audience for Zoomcar has been restricted to mainly Tier-I and Tier-II metros in India. They have only focused on maintaining a very local and dense network in existing cities, rather than expanding to new cities. They aim to provide affordable services in cities with higher income, rather than opening business in new cities where there may not be instant success. The students and young working professionals seem to be the most appropriate target audience, using their cars for weekend trips or short outings. Given internet access and the tech savvy nature of the intended audience, one would expect the product offering to be perceived to be valuable.

Partnerships

Zoomcar has created several partnerships with auto manufacturers, as well as with local authorities to improve the user experiences. Few of such partnerships include: • Partnered with Tata Motors to add new 50 Tata Nano to its fleet • Partnered with Mahindra to introduce an electric vehicle (Mahindra Reva E20) Aimed at promoting sustainable and eco-friendly modes of transport in Hyderabad and Mysuru, the initiative will make these electric vehicles available to residents and visitors looking to rent a car. Zoomcar has already received 20 e2oPlus cars from Mahindra and is in the process of onboarding an additional 400 electric vehicles.

Zoomcar believes that the combination of electric mobility with shared mobility may help bring down overall operating costs by upto 80%. Achieving cost efficiencies by continuous innovation is in line with the growth strategy adopted to ensure sustainability. Given the low barrier to entry, Zoomcar will have to use the Run strategy by anticipating future customer needs and positioning itself as the first to provide a better customer experience.3w

Future plans include strategic alliances with multiple OEM partners to increase the base of Electric Vehicles in their fleet. • Partnered with local universities, hotels and corporate IT parks to secure parking for its vehicles

Profitability Potential

1) Value – Zoomcar certainly offers services which are very valuable to their target segment. The customers will provide the money only if the service meet their needs. Their services can provide complete satisfaction among the customers, increasing their loyalty and expanding the market share in Indian context. The customers perceive their services as highly beneficial compared to their competitors, thus proving them as an asset in today’s world. 2) Adaptability – In this age of globalization and rapid technological changes, Zoomcar stands in a perfect position to capture the target market by being highly adaptable. They provide a platform through which users can book different cars for different distances. They have the opportunity to be highly flexible in providing such services, if they can continuously innovate and improve on their existing infrastructure. They can also customize their service offerings to target new segments of customers. 3) Rareness – Zoomcar may not be able to provide the customers a rare value proposition, but what they certainly provide is that their services are much better than what their competitors are currently providing. They are the market leaders and offer a level of

benefits to users which is currently differentiating them from others. They have a possibility to make money if they continue to deliver such excellence.

4) Imitability – The services they provide can be easily imitated or substituted by the competitors, considering the technological innovations in today’s world. Their business model is highly imitable, which is why they need to continuously evolve and adapt to the market and increase the possibility of earning money. 5) Monetization – In terms of making a business profitable, Zoomcar needs to continuously monitor its pricing strategy to remain ahead of competition. Moving on with lower prices may help them capture the market, but it will certainly leave money on the table. Pricing high is not an option for them, thus they need to continuously optimize their pricing to extract maximum economic benefits from the business.

Thus, the business has potential to make money and earn profits, however, it needs to continuously evolve and improve its existing processes to ensure sustained success in Indian market. If it can continue to satisfy its customers and offer valuable services, the business will certainly earn money for near future.

Strategies for Future Expansion

In case of Zoomcar, Imitability of Invention that is car rental service is very high, since the barrier to entry is very low. It’s an app-based model which can be easily imitated and improved also. Its complementary assets, vehicles are also very cheap to acquire since it does not own the vehicles. Although strategic partnerships are key here, there are multiple automobile manufacturers in India which dilutes any advantage. Hence based on Teece Model, Zoomcar falls under Run strategy where it is difficult to make money. Despite being profitable, it is largely dependent upon seeds and investors to make any new investment. Through their business they are only able to meet the capital requirements. For any capex, they require outside funds. This in turn is diluting the stake of owners in the company and the company is highly susceptible to takeover or acquisition.