Mumbai: French banking major BNP Paribas’ corporate car-leasing subsidiary, Arval India, will be investing Rs 560 crore to treble its fleet-size in the next two-years, a top company official said.
“We will be purchasing around 7,000 vehicles by 2013 which will give us a better footprint in the Indian corporate operational leasing market, which we feel has a tremendous scope to grow,” the company’s managing director, Liam Donnelly, told PTI.
According to him, the average car cost comes to around Rs 8 lakh and the end of the new investment phase (2013) will also see the company, present in India since 2008, achieve break-even.
Presently, it has leased out 2,500 vehicles to Indian corporates and invested close to Rs 150 crore, he said, adding it plans to grow to 7,500 by 2013.
Operational leasing of vehicles, mostly cars, is a complicated market under which a corporate leases cars mostly for use by senior executives. Arval, the lessor, handles all overheads like maintenance of the vehicle, its insurance, repairs, while running costs like fuel and driver’s salary are paid by the lessee corporate.
The advantages for a corporate is that it gets to practically own a vehicle without taking the depreciating asset on books and is also not hassled by paperwork.
Arval presently controls a seven per cent market share in the corporate car-leasing market which it plans to raise up to 12% by end-2013, Donnelly said, adding its competitors in India include Leaseplan owned by Volkswagen.
The average term of a contract is three-four years after which the car is sold to a third party, he said.
Donnelly, who had earlier served with Arval in the UK, says the company services clients across categories and the cars it has leased include the Tata Nano to a high-end S Class Mercedes. It charges a certain fee per month as management fees which will include the capital cost of the vehicle, its maintainance charges, provisioning for repairs, etc.
“We are impartial about brands while pitching before a corporate but what we give him is a TCO (total cost of ownership) which is derived through the historical data which we have accumulated over years of experience,” he said.
Currently, Maruti’s Swift, Honda City and Toyota Innova are favourites in their respective categories with the corporates, he said.