In 2004, former Cisco employee Gaurav Aggarwal decided to fly down from the US to visit his family in his hometown Roorkee. To ensure a hassle-free commute, Gaurav decided to book a cab service beforehand that would ferry him to the quaint Uttarakhand town from the Delhi airport.
To his astonishment, Gaurav couldn’t find a single reliable online car rental option in the national capital. This gave Gaurav some food for thought, who eventually started a car rental company that would cater to people like him who wish to commute long distances without the knowhow of the city and its surroundings.
“I was working in the US since 1999, and when I decided to visit my family, I was disappointed to see that even in 2004, we didn’t have these basic services that are reliable and provide quality services and fares. The idea to start a car rental company was conceived in my mind then only,” Gaurav says, in interaction with SMBStory.
In 2006, the car rental service company Savaari became operational. Initially, Gaurav moonlighted with a bootstrapped capital of Rs 55,000. After 14 years of its inception, Bengaluru-based Savaari is now raking an annual turnover of Rs 80 crore.
Edited excerpts from the interview:
SMBStory [SMBS]: What is Savaari, and how did you start the business?
Gaurav Aggarwal [GA]: Savaari is a chauffeur-driven car rental company, operating in 1,800 Indian cities. Its services range from intercity cabs, one-way drops, airport transfers, to local hourly rentals.
The plan to start a car rental company was already in my mind when I was visiting India in 2004. I discussed the idea with my cousin, who was into the travel business, and got interesting insights into the industry. However, I took two years to do my research before establishing the business, which also helped me to rethink if I’m on the right path.
I started Savaari in 2006, moonlighting along with three other co-founders — Mohit Khanna, Rahul Khanna, and Manik Shah — who were handling the business in India for full time.
Savaari’s business model is based on leasing or renting out cars from vendors. The company doesn’t own any vehicles of its own.
While we didn’t make any money in the first year of starting up, we were also aware of the fact that Indian consumers will take some time to understand and get comfortable with our novel concept. We made money and became profitable in our second year of operations.
Having spent four years in the US, after launching Savaari, I moved back to India in May 2011 to work full time in the company. Within 10 months of my return, Savaari raised its Series A round from Inventus Capital Partners in March 2012, and in September 2013, it raised the Series B round led by Intel Capital, along with Inventus Capital Partners.
SMBS: What kind of services does Savaari provide?
GA: Savaari’s approach to diversification has always been led by customer needs while staying rooted in its core competence of car rental services. Leveraging its tech infrastructure and with in-house experts on road trips, Savaari provides the following services:
- Outstation round trip rentals: This is one of the best offerings in terms of price and quality. We have taken the stance of being our customer’s travel partner, and not just a transportation partner.
- One-way intercity drops: We operate in over five lakh routes, where customers can take a drop from one city to another and pay for one-way only.
- Flat priced airport transfers: Based on the customers pick up or drop off location, we charge a pocket-friendly, flat price to all our customers opting up this service.
- Hourly rentals for local travel: In this service, customers can keep the car and driver with them for a whole day. The packages vary from 4hrs/40km, 8hrs/80km, to 12hr/120 km, and customers have to pay for the extra hours and extra kilometre based on their usage.
Customers can book their travel either by our website or through the Android and iOS apps. We have also received a Net Promoter Score (NPS) in the mid-50s, which is considered excellent in the car rental industry.
SMBS: How are you differentiating yourself from the competition, especially with startups like Ola and Uber dominating the market?
GA: While companies like Ola and Uber target same city commutes, Savaari primarily serves customers that are looking for intercity or interstate commutes.
The car rental industry is conservatively estimated at $15 billion. However, it is dominated by the unorganised sector, which accounts for 90 percent (close to $12 billion) of the market. The on-demand car rental market and employee transportation market, among others, constitute the organised rental car sector.
To differentiate from its competitors, Savaari blends intelligent use of technology with a healthy dose of operational capabilities. Through this, the company’s tech-based platform can aggregate the best-in-class cabs and drivers on one hand, and assign the most suitable cab and driver to its customers on the other, at the most affordable rates.
We have four demand channels that contribute to our business. The online properties, which comprise the website and app, contribute 40 percent, while our call centre and partnerships with leading travel companies bring in 35 percent and 15 percent of our business. The rest 10 percent of the business comes from our corporate clients.
SMB: What are your challenges in sustaining the business?
GA: One of the biggest challenges in the intercity car rental business is the effect of travel seasonality (weekend versus weekdays, peak versus lean months). The ability to tone down the seasonal demand volatility through complementary product offerings is the key to growth.
A healthy dose of operational oversight is also necessary for this industry to achieve excellence in service levels, which prevents the business from becoming an automated model.
Another challenge is the barriers to inter-state mobility by the road, which includes exorbitant inter-state taxes for cabs, non-transparent, as well as unorganised check-post interactions. Savaari is looking to overcome this by reducing the information asymmetry with the customer and guiding them with a transparent disclosure of all the costs involved during a trip.
SMBS: What are you looking ahead in the future?
GA: We are very excited about what the future holds. We have built a business model which is a great mix of automation, manual oversight, and scalability, which provides a customised experience to customers. Our model is also economically sound in terms of unit economics, which has helped us achieve profitability.
We are confident that this is the right model for us to go after the $12 billion unorganised car rental sector, and grab a very large slice.
We love everything about travel, and we firmly believe road travel is the best way to explore any place, especially in a country like India. We have taken it up as our mission to have every Indian fall in love with road travel. While the ever-increasing road infrastructure is helping us significantly in our mission, we know we have hardly scratched the surface, and there is so much more to travel. This is what excites us each day.
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