India is witnessing a profound change in the shared mobility sector which makes a good case for the government to reform its policy for ‘peer-to-peer (“P2P”) car renting’ or ‘Airbnb for car’ segment. Presently, the regulatory framework for shared mobility and vehicles in India is governed under the Motor Vehicles Act, 1988 (the “Act”), which does not permit sub-rental of private vehicles (‘vehicles possessing private number plate’). The following legal challenges can be faced in sub-renting of a private vehicle: 1) under Section 66 of the Act, the government requires car owners to get a permit from the regional or state transport authority for the use of private vehicle as a transport vehicle for passengers. Since leasing out of private vehicle to a stranger in exchange for money would be construed as a commercial activity, the government expects you to pay relevant taxes and get a black commercial license plate with yellow numbers emboldened – as the car would be leased out for self-drive rental purpose. 2) under Section 147 of the Act, the insurance companies are not required to cover any contractual liability while giving out their private package policy for cars. This permits insurance companies to cover only private use of vehicle by the owner or a person known to the owner. Any third person driving the car who is not known to the car owner is not covered under the policy. Due to the above restrictions, peer to peer car renting becomes unlawful and extremely risky for private car owners in India. However, with growing change in consumer behavior and rise in preference for shared means of mobility such as Uber, Ola and self-drive rental cars from companies such as Zoomcar, and opting for lease and subscription model over buying a car – makes a compelling case for the government to regulate the highly promising P2P car rental segment.
The concept of P2P car renting is simple and revolutionary. It allows car owners to make extra money on days when they are not using their car. Just like an Airbnb, the car owner decides the rent of the car, the number of kilometers to be driven and the time period between which one can rent the car. How does it work for the renters? Instead of going to a traditional car rental agency, which will have limited car options and expensive rates due to parking fee/airport fees/shop rental, renters can rent a car near to their residence or anywhere in the city at a lesser price for specific number of hours. With this arrangement, the car owners can rent the car subject to their own availability and usage, and generate passive income on the days they are not using the car. This system works really well for the renters as it eliminates the hassle of dealing with car rental agencies and connect them directly with the car owners, thereby, avoiding all the tedious paperwork and creating a sustainable environment for car renting virtually operable through a mobile app.
The core operational model for future P2P car rental companies and renters in India should remain similar to other countries where this model is prevalent. The P2P car rental companies in India would first require renter to register their credentials on company’s app such as a valid driver’s license, Aadhar card and payment details. Second step would involve company processing renter’s documents, followed by its verification, and finally validation of renter’s account. Once registered with the company, the renters will be able to select the preferred area of the city from where they would like to rent, then select a car and make required transaction for it. On the day of trip, the renters will be required to reach the pickup location 15 minutes prior to the requested time of the trip and unlock car through their app (keyless entry). Also, before starting the trip the renters would be required to take certain pictures of the car such as of fuel level, kilometers, dents, etc., to be uploaded on the app so as to avoid any future disputes with the car owner. Renters will further be given flexibility to rent from a minimum of 8 hours to some number of days or months, subject to availability by the car owner. It will also be mandatory for renters to purchase insurance along with the price of sub-rental, as it will protect both renters and car owners from any unforeseen damage/loss of property.
P2P car rental segment promises millions of Indian citizens to get a car anytime from near their residence on a need-per-se-basis and at the same time offer an opportunity to the car owners to make passive money from their unused car, also, contributing towards shared economy of the country.
Companies in India such as Drivezy and Ridengine already allow individuals to peer rent car through their platform.
It is now estimated that almost 2.9 million people in North America avail services of this segment.
In Europe, the P2P car rental segment have been blooming as well. In UK, leading companies in this segment such as Drivy (now Getaround) and Hiyacar have been able to curb 72% of their subscribers from owning a car. These companies claim that 65 percent of their subscribers used to own one or more cars before they started using their services.
P2P car rental segment has arrived fairly recently in South-East Asia region. It is estimated that 25% of all millennials in South-East Asia have unpaid car loans and they are leasing their car to strangers through P2P model to generate extra passive income, which in turn help them towards paying back their car loan.
Unlike western countries where car is considered an utility, owning a car in India is still seen as a status symbol. In the past few years, aggregators such as Uber and Ola have radically changed how people commute. Market in the FY 2019 saw unprecedented change in consumer behavior, and therefore, a sluggish growth in passenger vehicle demand.
Once government decides to regulate this segment, entrepreneurs and leading players around the world would want to tap on this opportunity at the earliest, as India time and again has proven to be a favorable battleground for startups and innovative models of shared mobility. The future players trying to get in this segment will have to come up with radical ideas to cater specific needs of Indian car owners and renters. In USA, hiring car can cost up to 47% more when hiring from a traditional car agency when compared to Turo or Getaround. This cost difference can be further reduced in India with availability of cheap labor and affordable cars. Peer-to-peer car renting is not only for an average car owner, but it also promises exotic/old car collectors to make money and create unique experiences for enthusiastic renters.
https://www.psmarketresearch.com/market-analysis/india-shared-mobility-market
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Suyash Srivastava is a practicing advocate who has graduated with LL.M. from the University of California Berkeley (Boalt Hall) with a certificate in Public Law ...
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