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DGDT

Re-Designing Engagement
in
Automotive Industry

Group - 2
PRAGYA MAHESWARI - 61920545
PRIYANKA SINGLA – 61920066
DEVRAT SINGH – 61920759
PUNYA VATS – 61920549
SUMEDHA PANWAR- 61920022
Contents
Executive Summary ...................................................................................................................................... 3
Context ......................................................................................................................................................... 3
Changing Consumer Behavior ...................................................................................................................... 4
Suggestion .................................................................................................................................................... 5
Value Drivers of the Proposal ...................................................................................................................... 5
Mechanics ..................................................................................................................................................... 6
Dynamics ...................................................................................................................................................... 6
Engagement .................................................................................................................................................. 8
Feasibility analysis ........................................................................................................................................ 9
1. Market size and growth – 2020 ............................................................................................................ 9
2. Feasibility for Customer (for Sedan car) ............................................................................................... 9
3. Feasibility for OEM (for Sedan car) ..................................................................................................... 10
Execution .................................................................................................................................................... 11
Players involved ......................................................................................................................................... 12
Potential challenges ................................................................................................................................... 13
Appendix..................................................................................................................................................... 13
Executive Summary

The current market scenario for the automotive industry has changed drastically, indicating a

definitive shift of consumer preference towards an asset-light lifestyle. This has brought the

growth of the industry to a halt and the manufacturers are at crossroads.

We suggest Cars-as-a-Service (CaaS) approach for the manufacturers, wherein the customer can

take up a subscription plan for the company and select a car for use for a variable time period.

Customers essentially don’t own a car, but instead own a service under which they can change

their car as per the needs and desires.

The core objective here is to eliminate the current middlemen in renting cars and establishing

the CaaS method as the growth enabler for the manufacturers in the future.

Context

India's economy is currently facing a slowdown- its lowest in five years. Private investment has

dropped, and the banking crisis has made it hard to access credit - weakening consumer demand.

The automotive industry declined for the 10th month in a row in August, car sales dropped by

41% - the steepest fall in two decades.

Some of the reasons for the demand drop have been the following:

• Push for EVs: The Indian government is also pushing for a transition to electric vehicles

over the next decade, which some experts believe, has contributed to falling vehicle sales
 • Low financial Capabilities: In the current economic environment, banks have become

more sceptical and stricter with giving out loans, benefiting those with high CIBIL scores

• Changing Consumer Behaviour: The change in consumer pattern is said to be the

biggest driver of the marked shift in demand.

Changing Consumer Behavior

Multiple minute changes in the consumer behaviour have caused the downfall in sales. These

changes are as follows:

• Because of the rise of the smartphone usage along with dirt-cheap internet, convenient

cab services from apps like Uber and Ola are seeing a massive increase in usage.

• A large volume of car sales is driven by young, upcoming professionals with rising

incomes and fewer liabilities

 • The consumers are moving to where the jobs are - big cities. So, they live in places where

a car is unnecessary or even a liability (BBC)

• Congested traffic in big cities dissuade the young population of the country to own cars

• Bad infrastructure, roads and parking facilities are a big factor in opting out

Thus, there is clearly a need for change in the complete engagement process of the customers

with these services. We need to identify with the millennials and their Asset-Light approach, and

come up with an engagement accordingly.

Suggestion

Our suggestion is to reposition cars from being an asset to be a service in the eyes of the

consumer. Why buy a car on loan/EMI or dig up your savings when you can subscribe a car for a

month / 6 months / a year?

We propose to provide Cars-as-a-Service to the customers wherein they can take a subscription

and rent any car from the company for a variable amount of time. Based on their needs, users

can switch cars anytime, thus enabling in them a feeling of a new car every month/year.

Manufacturers can eliminate the middlemen (Zoomcar, Revv etc) from the process and hence

enable their growth in the future.

Value Drivers of the Proposal

- Users get to optimally own cars

- Users get to try new cars

 - Manufacturers get to reach a large and neglected consumer cohort

- Manufacturers can salvage a declining industry

Mechanics

The user will be charged a Monthly Subscription Fees (inclusive - Registration, Warranty,

Insurance, Delivery, Taxes, Maintenance, Concierge etc). The payment plans will look like as

follows:

Dynamics

There will primarily be 2 types of customers for this service. The detailed process for these

segments will be as follows:

Segment A- 22-year-old college student

Needs/Pain Points:

• Doesn’t need a car for the whole year

• Has to move between cities looking for jobs and better opportunities
 • Doesn’t want to pay for registration, tax, insurance, maintenance etc.

Why would he opt for renting a car (Motivation)?

• Lower monthly payments: The cost to lease a car is typically much lower than to buy

one. Little or no down payment is required

• Worry free maintenance: You rarely have to worry about getting hit with a large,

unexpected repair bill

• No resale worries if moving out of the town

Plan:

• Would mostly opt for weekly or monthly plans

Segment B- 35-year-old working professional

Needs/Pain Points:

• Wants a new car every year

• Drives few miles per year and uses his car mostly to commute to/from work

• Wants an upgraded car/SUV for weekend getaways once in two months

Why would he opt for renting a car (Motivation)?

• A new car every few years: If you lease a new vehicle every few years, you will always

have the benefit of driving a car with the most up-to-date technology, comfort, and safety

feature
 • No resale worries: Once a “closed-end” lease term expires you can simply return the

vehicle or choose to initiate a new lease for a different vehicle. But you never have to go

through the hassle of selling a vehicle yourself or being concerned about getting a fair

trade-in value

Plan:

• Would mostly opt for yearly plans

Engagement

There will be multiple engagement points for the customers as follows:

• Create “Invite Only” model for a high-end model of cars

• Use consumer content for brand advocacy: By incentivizing existing users to put reviews

and videos of their experiences on the company channels can increase user engagement

and help create a buzz for new potential users.

• Subscription offers like “Upgrade your car for weekends once a month” in yearly plans

• Rewards for existing customers for their loyalty and bringing in new customers

• Activities on Social media channels

• Contests such as “Maximum miles driven in a week”, “Drive your car to mountains this

week”, “Send your CARfie with your Valentine date” etc.

• More discounts based on your driving data (speed, car health etc.) captured over

subscription period
Feasibility analysis

The proposal fills up the gap of competitor models while eliminating the middlemen like

Zoomcar etc. from the process, giving manufacturers greater control over the consumer journey.

1. Market size and growth – 2020

Potential no. of vehicles in subscription model ~200k

Average expenditure per vehicle per month ~ INR 25k

Market size - ~$45bn

2. Feasibility for Customer (for Sedan car)

Ownership model (EMI)

• EMI = 30k per month for 5 years

 • Additional costs (includes Registration, Warranty, Insurance, Delivery, Taxes,

Maintenance, Concierge) = ~5 lakhs

Total cost = ~23 lakhs

Resale value = 3 lakhs (after 5 years)

Hence, Effective net cost = ~20 lakh

Subscription model (for 5 years)

• One-time membership fees = 1 lakh

• Monthly subscription fees = 25k

Total cost = ~16 lakhs

Effective net cost = ~16 lakhs

3. Feasibility for OEM (for Sedan car)

Ownership model (EMI)

• EMI = 30k per month for 5 years

Total value = ~18 lakhs

• Cost of a car = ~6 lakhs

Total cost = ~10 lakhs

Value-Cost = ~8 lakhs
 Subscription model

• One-time membership fees = 1 lakh

• Monthly subscription fees = 25k

• Valid for = 5 years

Total value = 16 lakh

• Cost of a car = ~10 lakhs

• Additional costs (includes Registration, Warranty, Insurance, Delivery, Taxes,

Maintenance, Concierge) = ~2 lakhs (economies of scale)

Total cost = ~12 lakhs

Value-Cost = ~4 lakhs

Execution

The execution plan will be as follows:

Players involved

OEM

Benefit

• New revenue stream

• Increasing pie by satisfying unmet customer needs

Actions

• Figure out financials

• Decide categories of offering

• Product type wise: Hatchback, Sedan, SUVs

• Category: Regular, Luxury

Dealership

Benefit

• Repeatedly monetize used/new vehicles

• Way of competing with online platforms

Actions

• Figure out financials

• Deals with allied services: Insurance, Maintenance

 Technology Startups

Benefit

• Revenue stream

• Way to enter automotive industry

Actions

• Build relevant tools: Predictive analytics, Due diligence, End to end service

support

Potential challenges

Appendix

• https://www.transparencymarketresearch.com/vehicle-subscription-market.html

• https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/tesla-

battery-partially-blamed-for-killing-2-teens-in-crash/72911444

• https://www.forbes.com/sites/sarwantsingh/2018/07/30/your-next-car-could-be-a-

flexible-subscription-model/#380ecacb4ffa