Ownership models in the auto sector are evolving quickly and the EV industry is on the cutting edge. Subscription-based ownership of EVs are setting the stage for disruption in India, where affordability is the prime factor that drives consumers. The novel model solves the upfront cost and infrastructure hurdles that have slowed the country’s move towards EVs.
And how would you like to own an EV without the need to pay a premium upfront? Rather, you could simply shell out a small monthly cost that covers everything from repairs to insurance. It’s no longer a mere thought but is now a reality as automakers such as Tata Motors offer subscription plans that cater to Indian customers.
In a world where only 5 percent of cars are electric, these initiatives would open the door to a greener, more accessible future.
India’s EV Landscape: Growth and Challenges
In India, the electric vehicle industry has seen massive growth in the two-wheeler segment. In India, EVs made up 5 per cent of the total car sales between October 2022 and September 2023, according to a study by Brain & Company. Though that figure is likely to rise to 40% by 2030, there are challenges in the passenger car segment, which accounts for only 9% of EV sales.
Key Challenges
High Upfront Costs
EVs cost substantially more than ICE cars. Electric bikes tend to be 15% more expensive than an equivalent ICE vehicle, and EV cars are close to double the price of petrol or diesel vehicles.
Limited Charging Infrastructure
Charge stations are scarce, especially in rural and semi-urban areas. Such infrastructure shortfalls present another barrier to EV buyers.
Long Charging Times
In contrast to ICE vehicles, which refuel in minutes, EVs take longer to charge, and are therefore less comfortable for extended trips
How Subscription Models Work
Subscription-based ownership allows a customer to access an EV through monthly payments rather than buying it directly. Such charges usually extend to services such as:
- Motors used: The EV is offered during the subscription period (12 to 36 months).
- Repairs: Basic repair work is covered.
- Coverage: Full-time policies come with the deal.
Service on the Road: The service is provided at all times for emergency services.
Tata Motors’ subscription for the Nexon EV, for example, costs 29,500 per month and includes all of the above. These products also cut down on upfront capital requirements, making it more feasible to own EVs.
Benefits of Subscription Models for Indian Consumers
1. Affordability
The upfront price of EVs has been an important hindrance for Indian consumers. Consumers can overcome this cost barrier by using a subscription. A monthly subscription amortize the cost, making EVs more accessible to more consumers.
2. Flexibility
Subscriber-based models allow for ownership flexibility. Tenants can be assigned to customers for the length of their interest, be it a temporary trial or a long-term commitment. This versatility is particularly appealing to younger, urban consumers who demand convenience and versatility.
3. All-Inclusive Packages
Subscription plans remove the complexity of ownership and include maintenance, insurance and roadside assistance as part of the monthly payment. Users will no longer have to fret over extra fees or surprise charges.
4. Risk Mitigation
Concerns over battery life, resale value, and charging networks are key issues for first-time EV purchasers. Subscriptions remove these risks by giving you the chance to trade in the car at the end of the period or get a newer model.
Driving EV Adoption Through Subscriptions
1. Overcoming Cost Barriers
In a country where cost is a determining factor in consumers’ choice, subscriptions can democratise EV ownership. They remove the requisite chunky down payment, thus lowering the barrier for middle-class families to buy EVs.
2. Promoting Awareness and Trial
Subscriptions also let reluctant buyers experience EVs without making a purchase. This trial period can foster trust and familiarity which can in turn turn subscribers into customers.
3. Aligning with Urban Lifestyles
Subscriptions serve consumer demand in big cities, where parking and vehicle use are different from the countryside. They respond to the increasing need for temporary mobility and collective ownership.
Challenges of Subscription Models
Subscriptions are convenient in a variety of ways, but they are not without their drawbacks:
Perceived Value vs. Ownership
In India, a good portion of the population still thinks that ownership means security. It will take cultural and cognitive changes to persuade them to subscribe.
Scaling Infrastructure
In order to compete, automakers need to create effective networks of charging, servicing and support. Unless we have the right infrastructure in place, subscriptions will never be as compelling as they once were.
Cost Competitiveness
Monthly subscriptions should be on a par with EMI schemes for ICE vehicles. High subscription fees may put off potential users.
Lessons from Global Markets
States such as the United States and Germany have already been able to hit the ground running with subscription EVs. Companies such as Volvo and Porsche also provide multiple subscription options depending on your customer base. India can learn from such cases while adapting products to its market landscape.
Opportunities for Automakers and the Government
For Automakers:
Collaboration with Fintech
By partnering with fintech providers, you can streamline subscriptions and provide cashbacks or loyalty points.
Customizing Plans
Tri-tiered subscriptions with varying benefits can appeal to a broad range of customers.
For the Government
Subsidies for Subscriptions
Extending EV subsidies to subscriptions can further drive down prices for customers.
Tax Benefits:
Tax incentives for subscription-based EVs can spur adoption.
Infrastructure Expansion:
Rapidly launching charging stations and battery-swapping hubs is essential to the success of EVs and subscriptions.
A New Era of EV Ownership
Subscription models can change the way people buy EVs in India. Having the ability to overcome the primary challenges of cost and ease, these models could accelerate the transition to electric mobility. Subscriptions offer consumers in India the chance to enjoy EVs without the financial burden of owning them.
Once automakers have improved their product and the government makes infrastructure investments, subscription-based EV ownership might be an integral part of India’s sustainable mobility agenda. It’s a difficult path to travel, but with the right policies and innovation, the promise of sustainable mobility for all is not far off.
