The car rental business in India is on a roll, no matter the reasons?it could be anything from a boom in travel and tourism to newer brands hitting the roads with monotonous regularity. Industry estimates show the rental car segment, including radio taxis, is worth about Rs 5,000 crore, with over 2,00,000 cars in the circuit until the end of 2006. This is likely to touch Rs 5,600-5,700 crore in 2007-08 once latest data are released. The industry is expected to be worth Rs 6,300-6,400 crore in 2008-09, which is a projected growth of around 25%.
?The last one-and-a-half years has seen the entry of a large number of international players that have given more options to customers. This, coupled with investments in road infrastructure and setting up of new airports, has led to a lot of movement on roads, especially for leisure travel, which in turn has given a boost to the concept of self-drive,? says Rajiv K Vij, CEO, Hertz India.
No wonder, people are willing to shell out anything in the range of Rs 1,300 to Rs 1,400 for a Swift daily. And none winces to pay over Rs 5,000 for a Ford Endeavour or a robust Rs 10,000 to Rs 15,000 for a Mercedes Benz for just eight hours of self-drive.
Despite this, the self-drive business in India is still at a nascent stage with less than 200 cars being hired on an all-India basis in 2006. But, with a boom in the tourism industry in India, the growing income levels and new retail outlets like Hertz Everywhere and Rental Solutions by Avis, the sector is expected to grow 100% this year and treble that mark in the next one year. If that happens, an estimated 1,500-plus cars would be ready to be rented out by the end of 2008.
Adds Ravi Lamba, CEO of Avis India, ?India has lately emerged as the most sought-after destination both for leisure travel as well as business opportunities, and this has resulted in the overall growth in the industry, with chauffeur-driven cars being the largest contributor to the industry?s phenomenal growth story.?
The organised car rental industry, which is just 20% of the total rental market in India, constitutes a mere 3% or a fleet size of 6,000 cars and contributes to about 7% or Rs 400 crore to the total revenue. Of this, a mere 10% is currently contributed by the self-drive business, 20-25% by leasing of cars and the rest come from chauffeur-driven cars that are largely used by corporate houses.
Moreover, legislation that mandate a minimum of 75 cars and a presence in at least five cities for getting a licence to offer self-drive services is also restricting growth of this segment. However, the entry of new players like Sixt, Europcar, Thrifty and Dollar over the last one-and-a-half years is expected to bring about a further consolidation in the organised segment.
According to Jehangir Ghadiali, managing director, Travel House, ?With consistent growth in the GDP, which is hovering around 9%, and the upcoming large number of projects, both in business and leisure areas, there is a large scope of the usage of quality cars in the corporate and tourism sectors.? Indeed, the company with a topline of Rs 100 crore and a fleet size of 550 cars is mulling to take it up to 600 this year.
?In spite of tremendous growth in mass transport, especially in cities like metros, the changing lifestyle has led to growth of around 30% in the organised sector and 10-15% in the unorganised category of the rental car business,? explains an industry expert. ?Moreover, the availability of premium cars like the Merc, the BMW and the Audi at lower rates to the licence owners have also added to growth in demand in the industry,? he adds.
No wonder, the industry players are now aggressively looking at offering limousine services on a large scale. ?Right from the Mercedes to the stretch limousine, a new market is fast opening up and both major international airlines and affluent domestic carriers are wanting to provide limousine-driven services to their premium customers,? says Vij. The company, which currently has a fleet of over 2,000 cars, is mulling offering limousine services in the next three-four weeks from its Hertz Everywhere outlets launched in July last year.
Traditional luxury cars have so far constituted only 2-3% of the total fleet of rented cars for organised players, but their share in the overall industry is expected to go up to 5-10% in the next two-three years.
Also, companies worldwide take cars on an operating lease basis for their employees instead of buying them. The concept is now fast gaining ground in India as it takes away all the hassles of a company for purchases, financing, registration, insurance, documentation, maintenance and replacements. Players like Hertz are offering 1,500 cars on corporate lease and the number is expected to go up. Similar growth is expected in other car rental companies.
There is no doubt that the top players are gung-ho about growth in the industry. ?The industry is at an inflection point today. The next two-three years belong to the car rental industry and there would be major growth, especially in the organised sector,? adds Vij of Hertz India.