In the dynamic landscape of India’s economy, certain industries make substantial impacts on our daily lives, yet they often go unnoticed. Among these, the car rental industry stands out, especially considering India’s burgeoning tourism sector. Traditionally perceived as a utility service, the car rental industry is gaining recognition for its pivotal role in enhancing travel experiences across the nation. With its roots deeply embedded in bustling cities, sprawling suburbs, and sought-after tourist destinations, car rentals offer a convenient and flexible transportation solution for individuals and businesses alike.
The growth of car rental services in India
The car rental industry in India has seen substantial expansion, driven largely by an increase in domestic tourism. This surge is linked to the growing economic power of the middle class, a rising trend in road trips, cost-effective travel packages from car rental firms, and improved road infrastructure. In 2022, the sector reported earnings of USD 139.3 million. It’s forecasted that by 2024, revenues in the car rental sector will soar to USD 2.98 billion. The sector also witnessed a rise in market consumption volume, with a compound annual growth rate (CAGR) of 4.2 percent from 2017 to 2022, totalling 19,282.0 vehicles in 2022. Continuing at this pace, it’s estimated that the market will grow to around 20,935.7 vehicles by 2024.With a population exceeding 1.38 billion, public transportation systems often struggle to accommodate the overwhelming demand, leading to crowded buses and metros, particularly during peak hours. This has heightened awareness and interest in personal mobility solutions, placing car rental services in the spotlight as a convenient alternative to vehicle ownership, which comes with its own set of expenses and maintenance challenges. By 2028, the number of users in the car rental market is expected to reach 81.57 million users.
This growth is supported by the integration of technology, app-based booking systems, and the mobility-as-a-service (MaaS) model, offering varied mobility solutions tailored to customer needs, from local cabs to airport pickups and round-trip outstation services. These advancements not only enhance the travel experience but also pave the way for personalised and comfortable journeys.
Impact on tourism
Car rental services have significantly improved access to tourist destinations, making travel more convenient and accessible, especially for remote or lesser-known locations. Car rental services have contributed to a notable increase in tourism, with some regions reporting up to a 20 percent rise in visitor numbers, particularly to offbeat destinations that were previously harder to access.
The market is also witnessing a surge in online booking services due to increased internet and smartphone penetration in India. With internet penetration at 48.7 percent in 2022 and smartphone penetration reaching 70.95 percent by June 2023, the convenience of online bookings has become more pronounced. This shift towards digital platforms offers customers a wide array of information regarding vehicle availability, rates, and conditions, enhancing the overall user experience.
Car rental companies are spearheading unique services that go beyond what other modes of transportation offer. By integrating multilingual drivers into their fleets, they not only facilitate smoother communication for travellers from diverse linguistic backgrounds but also offer personalised insights into the local culture, cuisine, and hidden gems, providing a travel experience that’s rich in educational and cultural value. Additionally, these companies are leveraging the latest technology to enhance customer experiences; AI-powered chatbots and VR destination previews stand out as pioneering tools that streamline the booking process and offer a glimpse into travel destinations before even arriving.
Furthermore, car rentals are curating cultural experience itineraries in collaboration with local communities. This includes creating itineraries that allow travellers opportunities for immersive cultural interactions, such as participating in local craft workshops, culinary sessions or historical road trips, which are not typically available through other transportation options.
The economic benefits of enhanced tourism are palpable, especially with car rentals encouraging road trips to off-the-beaten-path destinations. Travellers, driven by curiosity and the desire for authentic experiences in these regions, spend on a variety of services including accommodations, dining, souvenirs, and unique local experiences. This injection of funds is crucial for the sustenance and growth of small businesses, which are often the backbone of these communities. This enhances the quality of life for local communities and makes these regions more attractive to future visitors.
Success stories of pioneering car rental companies promoting tourism
Pioneering car rental companies are revolutionising tourism, making significant strides in transforming how we explore and experience the country’s rich cultural and scenic landscapes. Take Grab for instance. Originally launched as GrabTaxi in 2012, Grab has evolved into Southeast Asia’s leading car-hailing, taxi-sharing, and food-delivery service, operating in over 36 cities across seven countries. Specifically, the taxi’s debut in Thailand resulted in an impressive 25 percent increase in tourists visiting off-the-beaten-path sites in its first year, underscoring the profound effect the company has on changing travel habits. The company has also produced travel guides in both English and Chinese, featuring curated lists of tourist spots, eateries, festivals, and activities across Bangkok, Pattaya, Chiang Mai, and Phuket, thereby boosting tourism in these areas.
In India, our company, has played a vital role in promoting domestic tourism. Firmly rooted in the belief of making every journey an exploration, the company aims to bridge the gap between well-trodden paths and the hidden splendours awaiting discovery. The company’s advocacy for road trips as the quintessential way to experience India’s rich tapestry underscores its commitment to unveiling destinations like Osiyan in Rajasthan, Andretta in Himachal Pradesh, and the tribal heartlands of Odisha and Chhattisgarh. The company’s award-winning “Chasing Rural Summers” campaign, harnesses the power of social media and casts a spotlight on the cultural wealth of tribal communities. This innovative initiative not only drew attention to the artistry and markets of these regions but also inspired a surge in road trip bookings, evidenced by over 5,000 journeys to Odisha’s tribal areas within just a year.
The company embraces a powerful commitment to last-mile connectivity: to leave no road in India unexplored. Through these endeavours, the company continues to fulfil its mission, turning each journey into a story worth telling, and significantly contributing to the flourishing of tourism in India’s most untouched locales.
Steering towards a brighter future
Car rental companies are revolutionising the way we experience tourism by providing enriched travel experiences that showcase the cultural and scenic wealth of regions. Yet, despite their success and contribution, the industry faces challenges, including the need for improved road connectivity. Fortunately, the development of new expressways and the government’s investment in rural infrastructure could also widen the reach of car rental services, improving access to remote areas. The outlook for car rentals within India’s tourism sector is optimistic, with projections indicating the market could expand to USD 200.4 billion by 2030. As they do so, they not only contribute to the economic development of local communities but also offer travellers a unique and immersive way to explore the rich cultural and natural heritage of India.
The author, Gaurav Aggarwal is founder and CEO of Savaari Car Rentals.