Zoomcar – Here is how two Americans zoomed into India’s car rental market

Four years ago, it came as a big shock to Americans Greg Moran and David Back that India lacked any short-term car rental services. So in 2013, the two University of Pennsylvania graduates, who frequently used such services in the US, decided to fill that void.

“For the first two or three months we were in disbelief,” Moran explained. “We knew that it would be a huge opportunity—whether we do it or someone else does.”

 



Today, their startup Zoomcar is among the largest self-driven car rental companies in India.

 

The business

The membership-based service allows individuals to hire cars by the hour or by the day. Reservations for cars can be made through Zoomcar’s website or its mobile app. And payments—that have to be made in advance—are accepted by credit cards, debit cards and net banking.



Zoomcar’s fleet currently includes everything from the Ford Figo and Honda Amaze to BMW 3 series and Mercedes-Benz A-Class sedans. Tariffs in Bengaluru range between Rs.80 (includes 10 kilometres for every hour booked) and Rs.430 per hour.

The company, with over 100 employees, currently has operations across six cities—Bengaluru, Mumbai, Delhi, Pune, Chennai, and Hyderabad—with a fleet of 1,600 cars and 250 pick-up points.

Earlier this month, Zoomcar raised $11 million (Rs. 70 crore) in a series-B funding round from Sequoia Capital, Empire Angels and NGP Advisors. According to CrunchBase, Zoomcar has raised $22.2 million (Rs141 crore) from 11 investors so far.

But why did other entrepreneurs in India not capitalise on this opportunity sooner?

“We had been contemplating self-driven rentals for years, but it was a tough decision to launch this service in India because of three reasons—it is very capital-intensive, the regulatory approvals are tedious and there is high vehicle damage on Indian roads,” said a competitor of Zoomcar that began operations a few months after the American duo.



Moran, however, says the damages seen by Zoomcar are far lesser than the company had estimated.

With the recently raised money, Zoomcar will now launch in tier-II cities. By early 2016, the company hopes to have business in at least 15 tier-II cities.

“We currently have a market share of around 60% and by far the largest fleet of cars compared to the competition,” Moran, co-founder and CEO of Zoomcar, told Quartz. “In five years from now, we want to be the most dominant player in the industry and take this market to the size that perhaps China is at today.”

China’s self-driven car rental market has over 200,000 vehicles, while India has just around 2,000, Moran said. The size of the self-driven car rental market in India is currently around $30 million, which Moran reckons can potentially grow to between $3 billion and $5 billion.

 



Riding to success

But for a country that is ranked 142 out of 189 in terms of ease of doing business, Zoomcar’s ride in India expectedly wasn’t entirely smooth.

For instance, Moran and Back’s initial plan was to import from the US GPS-tracking devices that would be installed in all their vehicles. But closer to their launch date, they realised that it would take at least three months to get clearances for importing the devices. So, instead, they decided to use locally available technology for their entire fleet.

Again, in December 2014, Zoomcar ran into trouble when it was listed among the companies that were suspended by the Karnataka government after a driver of the taxi-hailing service Uber was alleged to have raped a passenger in New Delhi. This despite the fact that Zoomcar is neither an online taxi aggregator nor an offline cab provider.

On the personal front, the two co-founders’ big challenge was to cope without friends and family while building the company in Bengaluru. After over two years at Zoomcar, Back recently returned to the US.



“David (Back) got married and wanted to be closer to family so he has stepped back from an active role (as the company’s president). But he continues to be on the board of Zoomcar,” 30-year-old Moran said. “I have no plans to go anywhere or to get married.”

 

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