A Case Study from Vulpix Solutions

1. Car Leasing Market in India Brief - This report was prepared for a Japanese auto major which wanted to enter the Indian car leasing market with its offering. Around 29 service providers and 100 corporate clients were surveyed through structured questionnaires to create a comprehensive picture of the market.

2. Car Leasing - Introduction The car leasing companies provide an alternate to the captive car fleets that are owned and operated by large companies. A fixed amount has to be paid per month based on the Age, Mileage, Services offered (Maintenance & repair, Insurance, Replacement, Accident management, Support desk, Pick and drop facility) and Interest rates. Car Leasing provides a distinct advantage in terms of Cost savings, Operational efficiency, Service and Tax benefits (the lease amount is deducted pre-tax) A CAGR of ~17% is predicted for this industry.

3. Key Highlights The size of the Car Leasing market in India is pegged at USD 2.5 Bn with a fleet size of 350,000 cars only 10% of which is organized. Unorganized Market Major international fleet management companies have already made their footprint in the Indian market with substantial start-up investments. Big Players Weak Resale Market The car resale market in India is sluggish and largely unorganized, which hampers the investment capacities of the large car leasing companies. No Standard Offering Variable taxation in states and hugely differing consumer requirements often due to the “newness of concept” mean that there is no standard offering. Given the size of the opportunity, entering the market seems like an attractive proposition. However, the investment plan has to take into account the risks associated.

4. Our Survey 29 car leasing companies operating in India and having offices in Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad were surveyed. The first level of interaction was limited to assessing the operations, size, business and USP of the companies. A second level of interaction with the CXOs gave insights into their feel of the business. 200 corporates spread across the six cities and involved in businesses like IT , Construction, Chemicals, Retail, Manufacturing were also surveyed. 4 sub-groups A-D were divided based on the number of employees. Sample Distribution

5. Demand 27% of the companies surveyed had some kind of corporate vehicle structure/requirement No variation in demand across cities

6. Critical Concerns favoring Car Leasing The capital intensive nature of maintaining a captive car fleet is the most critical concern. Large companies with wider operations are the most concerned.

7. Key Factors Driving Choice Amongst the respondents, Maintenance and Repair is one of the key factors driving choice

8. What do Clients want? Transparencyand Reporting are of the greatest value to the clients.

9. Key Challenges Chauffeurs All respondents termed availability of a well behaved chauffeur with strong knowledge of the city routes as the main challenge to the business. Unorganised used car market At least 90 percent of the used car market remains unorganized due to which leasing companies find it difficult to dispose off their used vehicles. Service Quality Services like Tyre, accident & maintenance management are generally not established in the market. Users prefer to get related services from the local garage at cheaper prices (Inferior Quality). Economic Uncertainty As the end users of the leased vehicles are the corporate. Therefore decisions on their fleet are directly linked to their economic status. Leasing is subject to Registration tax and VAT. These taxes vary from state to state and companies find it difficult to structure their pricing accordingly. Taxes Indian companies are still unaware of this concept and hence pose tough negotiations to the leasing companies. They try to structure the deals as per their whims & companies have to concede to suit clients needs. Undue customer negotiations

10. CXOs Speak The list is long; however the two biggest ones have been dealing with RTO guidelines and insurance. Although the RTO clearly states a policy on leasing vehicles and we can be put on the registration certificate (RC) as the associate lessor, we have had trouble in the southern states where the financer's name also appears on the RC, namely a banking institution. Now, we have been able to change this and only our name appears on the RC. On the insurance front, we had to find a work around and this has been accomplished by insuring the vehicle in the Company's name. The main concern is that this sector is largely unorganised. This is due to the presence of many small players as well as an unconsolidated used car sales market. Also, availability of good chauffeurs is also a concern. No matter how big the business is, in the end its chauffeurs who represent the company in front of the client. The car rental industry in India is largely unorganised as it has been dominated by a large number of small operators. Organised players have recently entered the arena and are expanding fast. This will ensure that the scenario changes quickly and the industry moves towards a more organised structure. This has become an attractive option for corporates because under this scheme, the companies need not show an unproductive asset on their books while they can use the vehicle as their own The Rates at which corporate are opting for operational leasing, the influx of major leasing companies in India, soaring interest rates and the wide variety of vehicle models to choose from, all point in one direction – operational leasing will grow Car Leasing also offers tax relief and saves up to 20%-30%, since the fixed lease amount per month is paid pre-tax and is a part of employees cost to company (CTC)

11. Thank You