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Leasing route to boost auto sales

autos Updated: Jul 29, 2012 20:45 IST
Manu P Toms
Manu P Toms
Hindustan Times
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Operational leasing, which accounts for 30% car sales in Europe, is gaining ground in India as many corporates find it as a cost effective option to provide perquisites to their top executives. Premium carmakers such as BMW and Mercedes Benz, who want to tap this opportunity, have already announced leasing offers.

Tomas Ernberg, managing director, Volvo India, told Hindustan Times the company too plans to provide operational leasing to boost its sales. Andeas Schaaf, managing director, BMW India, said: “We had some regulatory hiccups. But we will still introduce leasing in India.”

As finance arms of major car companies come up with their own plans, international operational leasing companies such as Leaseplan, Arval and ALD, which are present in India, find the scramble for India’s corporate vehicle market getting tough, although the market is expanding.

“Operational leasing thrive in the West where corporate sales account for 40% of the total car sales. Whereas in India it is just 5%. This will surely grow, providing opportunities for leasing companies,” said Rahul Maroli, head, sales & marketing, Leaseplan. The company in which Volkswagen has the controlling stake of 50% has 13,000 cars and works with 1,400 companies in India.

Currently, the total fleet size of the operational leasing companies is 35,000. “We expect this to reach 75,000 by 2017,” he said.

Corporates opting for operational leasing to provide highend cars to their top executives may be a fillip to the luxury car market in India which is estimated to touch 150,000 units a year by 2020.

However, the real boom of operational leasing in India will start once this ‘perquisite-based model’ paves way for ‘tool for trade model’, according to Maroli. “Companies using leased vehicles for outbound functions such as marketing and distribution will drive the sales. We are beginning to see that,” he said.