With the corporate and small and medium enterprises sectors accounting for 600,000 of the 1.2 million cars sold last year, operating leasing in the country is staring at a huge potential. To meet the demand, two of the biggest names in this industry -- Leaseplan and Hertz India -- are planning to ramp up capacity by spending Rs 2,000 crore and Rs 500 crore, respectively, over the next five years.
“The operating lease market stands at around 18,000-20,000 cars. At this level, we have not even seen the first leg of opportunity, which itself would ensure an exponential rise in volumes," said Ajai Narain, director (finance), Leaseplan. The company, which has a fleet of 12,000 cars, plans to expand it to 40,000 by 2013.
"While big corporate houses have already lapped it (lease) up, it is the small and medium enterprises that stand to gain the most by it," said Karunesh Arya, COO, Hertz Lease. Hertz, with a relatively smaller fleet of 2,000 cars, plans to add another 3,000 by the end of this year with an investment of Rs 100 crore. Further, it will expand to 9,000 cars by 2010 by spending another Rs 400 crore.
While tax incentives are an obvious attraction, many corporates also look at leasing as an outsourcing measure to free up resources and concentrate on core activities. "Like in the US and Europe, corporates are increasingly opting for operational leases to concentrate on core businesses," Narain said. "When a company buys a car for its employee it has to get into its administration and take care of its maintenance requirements. When it goes in for leasing, all the hassles are taken care of."
The potential is not missed by players who are not part of the game yet. "We tried our hand at leasing some time ago but our resources were getting stretched. So we made a strategic decision to concentrate on car rentals instead. But given the opportunity and potential we will make a comeback in the segment," said Alok Dutta, CEO, Sixt India.
Coming up next could be leasing for individuals provided the regulations allow tax incentives. Both Hertz and Leaseplan are open to it.
"We will offer leasing for individuals as well because we believe that even without the tax incentives it makes sense for a person to go for it. The mindset of consumers is changing and today nobody wants to keep a car beyond 5 years. In operating leases we are giving him a convenient option to do that," Arya said.