Scooter rentals give new spin to asset-light model - The Economic Times 16/08/19, 10)55 PM

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Scooter rentals give new spin to asset-light model

BY ALNOOR PEERMOHAMED, ET BUREAU | AUG 16, 2019, 08.08 AM IST Post a Comment

BENGALURU: Top scooter rental companies — Vogo, Bounce and Drivezy — are
increasingly adopting the assetlight business model pioneered by ride-hailing companies
Uber and Ola.

These firms have tapped a handful of companies to own the thousands of scooters that
run on their platforms, unlike ride hailing where individuals own the cabs. The obvious
advantage — assets, scooters in this case, go off-book, even as they still get a reliable
supply of vehicles, something that has been a huge problem for Uber and Ola.

While homegrown ride hailing company Ola has signed a deal to deploy $100 million
worth scooters on Vogo’s platform, Japanese wealth manager Harbourfront Capital has
There is growing competition from global players like
committed $100 million worth of assets to Drivezy. For Bounce, the Chennai-based TVS
UrDa, a Taiwanese company that has entered the
Motor Company has made a deal to attach its vehicles on the platform. market in partnership with eBike Go.

“Fundamentally, to build a business like ours, you either need a very strong debt partner EXPAND
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or someone that will lease you vehicles,” said Anand Ayyadurai, CEO of Vogo. “Our
business doesn’t need to spend on incentives for drivers to buy vehicles. This is a core TVS Motor
building block and we’ve solved for it with our 100,000-scooter deal with Ola.”
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If this model scales up, experts say the on-demand rental firms will just have to focus on
acquiring customers and efficiently run operations. “If these firms are only leasing vehicles, then their return on capital will be better, but
they would be paying some premium for this,” said Devangshu Dutta, CEO of management consulting firm Third Eyesight. “But,
customer acquisition will remain a big factor, along with efficient allocation of assets and network management.”

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Scooter rentals give new spin to asset-light model - The Economic Times 16/08/19, 10)55 PM

The business models of Drivezy, Bounce and Vogo may seem similar on first glance, but each is essentially testing out a different
concept.

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Scooter rentals give new spin to asset-light model - The Economic Times 16/08/19, 10)55 PM

While Vogo makes fixed monthly payments to Ola, Drivezy has a revenue-share model where 80% of the earnings from each trip go to
Harbourfront. Bounce, meanwhile, has a pay-per-mile model with partner TVS Motor. “We pay them (Original Equipment Manufacturers)
on a per kilometre basis and have a 36-month payment period. There’s an internal rate of return (IRR) control which is set at a maximum
of 10-12%,” said Vivekananda Hallekere, CEO of Bounce. “This is how we get most of our scooters today.”

There are drawbacks to this model, though. On-demand rental firms utilise the ‘Rent a Motorcycle Scheme’ (1997) to operate. Under
this, the entities owning these assets (vehicles) must obtain the licences. Firms such as Harbourfront have their own licences, putting
scooter rental firms in a bit of a grey zone, which could lead to fresh regulations like in the case of ride hailing firms.

The other issue has to do with exclusivity of contracts, where asset owners might not want to restrict themselves to working with a single
operator, which could lead to them deploying vehicles on multiple platforms.

The three companies — Vogo, Drivezy and Bounce — control 81% of India’s on-demand vehicle rental market, according to market
tracker Counterpoint Research.

Although Drivezy leads with a 35% share, the situation could change very easily in a still nascent market. There is also growing
competition from global players like UrDa, a Taiwanese company that has entered the market in partnership with eBike Go. “While the
risk proposition of owning the fleet depends upon the terms of the contract, we expect that by owning the bikes themselves companies
such as Ola and Harbourfront can get a larger share of revenues per ride, helping them reach break-even faster,” said Maurice Klaehne,
a research analyst with Counterpoint Research.

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