Market Trends of India Car Rental Industry
Growth in Tourism
- Rising government spending to improve the tourism sector in the country, coupled with a surge in international arrivals, serve as the major determinants for the growth of the car rental market in India. With the surge in tourist arrivals in India, there exists a massive demand for car rentals, as it gives the freedom to the tourists to plan their outings at their convenience rather than being dependent on the schedule fixed by travel agencies. Subsequently, consumers visiting India for business and conference-related purposes also avail of car rental services booked by the organizing team arranging the visit.
- Although international arrivals witnessed a steady decline between 2020 and 2021 due to the impact of COVID-19, with the gradual opening of the economy, international arrivals in India showcased a 305.4% Y-o-Y growth between 2021 and 2022. Similarly, foreign tourist arrivals in India touched 6.03 lakh (USD 0.82 million) in April 2023, an increase of 53.71% in the same period in 2022, wherein the number of foreign tourist arrivals in India stood at 3.92 lakh (USD 0.285 million) in April 2022.
- Further, the government's excessive focus on placing India as one of the major tourist destinations in the world contributes to propelling the demand for car rental services.
- For instance, in August 2023, the Ministry of Industry and Commerce pitched for increasing collaboration between India, Latin America, and the Caribbean (LAC) countries in areas such as tourism, hospitality, and promoting investment flows. Through this collaboration, the ministry expects a higher number of tourist arrivals from countries such as Belize, Ecuador, Nicaragua, Brazil, El Salvador, Panama, Chile, Guatemala, Peru, Costa Rica, Guyana, and Suriname.
- The Union government announced its plan under Budget 2023 to select 50 tourist destinations through challenge mode, which is to be developed as a whole package for domestic and international tourism.
- Subsequently, under the Budget announced in 2023, the Union Government of India allocated an amount of INR 1,742 crore for the development of tourism infrastructure and another INR 242 crore for promotion and branding.
- Another major determinant aiding the growth of the car rental market is the improved road and highway connectivity in India, which also helps domestic and foreign tourists to visit various cities by using a personal medium of transportation. For instance, the Indian government was successful in developing 10,993 km of national highways between 2021 and 2022. Furthermore, the government is aggressively planning to scale up the road construction project in FY2024 with higher investment in the investment trust fund (InvIT) set up by the National Highways Authority of India (NHAI).
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Increasing Demand for Online Car Rental Service to Gain Traction in the Coming Years
- The increasing internet and smartphone penetration rate in India is contributing to the surging growth of online car rental bookings in recent years. The internet penetration rate in India stood at 48.7% in 2022, compared to 47% in 2021. Similarly, the smartphone penetration rate touched 70.95% as of June 2023. With the rise in the availability of internet and smartphone services across India, there will exist a demand for online bookings as it offers enhanced convenience to the customers, which gives the option of booking without visiting any physical location,
- Further, the integration of various online car rental portals in the ecosystem assists the consumers in garnering a variety of information related to the vehicles available, condition, rate per day, and cashless transactions, among others, which is readily available on the website or mobile application. It also helps in extending value-added services to the users, such as verification of documents of the renter, offering information to the renter regarding the car, services like drop and pick-up of the rented car at a certain place, e-signing contracts, etc., which enhances customers convenience.
- Various companies are actively implementing strategies to improve their online booking mechanism to cater to the rising demand for e-booking services. For instance,
- In May 2023, Indus Motors-backed self-drive car rental startup announced the launch of its upgraded mobile app 'IndusGo 2.0'. Designed to keep the end customer in mind, IndusGo 2.0 incorporates state-of-the-art technology and an intuitive interface, making the entire booking process seamless and hassle-free.
- TravelLocal, an initiative by Amsons Tours and Travels Pvt Ltd, has set up online car rental and cab services for local and outstation travel. Travelocity offers its services to over 99 cities across India, with 625+ operator affiliations. It allows its customers to rent a car or get a cab 24/7 by visiting its official website and making a few simple clicks.
- Integration of new-age startups in the ecosystem would further assist in the growth of online car rental booking services in the coming years, which is expected to record a surging growth during the forecast period.
