The next breakthrough in automotive retail is expected to be the Subscription model. However, the idea is yet to catch on in the Indian market. At a time when people can subscribe to furniture, appliances, music, and entertainment, some car makers around the world believe that the same would apply to them in the near future. India’s largest automaker, Maruti Suzuki also believes that the model has potential in the Indian market.
Speaking with Shashank Srivastava, Senior Executive Director (Marketing & Sales), MSIL, we learned that currently, only 2% of the sales in the Indian market are on a subscription basis.
Srivastava stated that subscription is a very new trend. The automaker observed from market research that some customers now don’t want to buy a product in their name instead would like to use it. Srivastava says that the subscription trend has started in metro cities and it is where the major potential for the new retail model lies.
Maruti Suzuki, Hyundai, Tata Motors, and more automakers offer plans that allow customers to subscribe to vehicles on a monthly/annual basis. Depending on the plans, customers usually select a vehicle of their choice and pay a monthly fee to use the vehicle. However, they don’t have to bear the running costs associated with owning a vehicle. With the subscription plans, customers are immune to regular service and maintenance costs, and insurance premiums. Customers can switch and upgrade vehicles and also turn their plans on and off depending on the offers.
Maruti Suzuki believes that there are four key types of customers who may find vehicle subscriptions beneficial. Customers looking for convenience who move from one city to another frequently due to their professional life, customers who need a second vehicle, aspiring millennials early in their career seeking status in society, and elite customers who like to change vehicles more frequently.
Maruti Suzuki launched its online retail platform in 2016 when online conversions were at a mere 3%. But the demand grew to 16% by 2019. After the covid 19 pandemic, online sales for the automaker grew to around 35-38%.
Srivastava confirmed that MSIL has been receiving a good amount of inquiries for its subscription model. But confirms that conversion has been slow. He believes that the leasing model in India will pick up slowly.
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