New Delhi: Luxury car maker Mercedes-Benz India Ltd has started focusing on sales to so-called fleet services, which include car rental and lease businesses and radio taxi services, to bridge the gap with rival BMW India Pvt. Ltd.
The company sold 90 cars on Monday to Carzonrent, a New Delhi-based fleet service operator. “We are also in talks with 2-3 more operators. We will share the details once we arrive on a decision,” said Debashish Mitra, director (sales and marketing), Mercedes-Benz India.
The Pune-based firm expects to generate 8-10% of total sales through such deals. “In the West or Middle East, we have a strong presence in fleet services,” said Peter T. Honegg, managing director, Mercedes-Benz India. “We are trying to evolve such practices in India.”
India has at least 20 fleet service operators with more than 300 cars, said Rajiv K. Vij, managing director of Carzonrent. Most of them do not have luxury cars in their fleet.
“The demand is rapidly on the rise,” said Vij. “We partner with various international and domestic airlines, hotels and financial services companies to service their high flying guests. Today almost 25% of our rental revenues come from this (luxury) segment.”
Analysts said this is a good strategy, but the company needs to sustain it. “Once you start getting orders from fleet operators, then those become repititive as you develop a good relationship with such fleet operators,” said Surjit Arora, sector analyst, Prabhudas Lilladher Pvt Ltd. “Initially, it will be a success, but to sustain this idea would be a challenge for the company.”
Globally, Stuttgart-based Mercedes Benz sells 10-15% of its cars to fleet services. “This is still in the processing stage. We will make it a separate entity once our financial services wing becomes operational,” said Honegg.
The car maker will this month launch a non-banking finance company to run its financial services business in India. It has already obtained the nod from Reserve Bank of India.
Mercedes-Benz India and BMW India are the market leaders in the foreign luxury car segment. The segment accounts for 1% of total cars sold every year in the country.
BMW India sold 2,377 units in April-June, registering a growth of 174% over a year earlier, while Mercedes-Benz India’s sales grew 49% to 1,664 units.
In 1994, Mercedes-Benz became the first foreign car maker to enter the Indian luxury car market by setting up a plant at Chikhali-Pimpri near Pune in Maharashtra.
This gave the company a headstart over Bayerische Motoren Werke AG (BMW) and Audi AG, which entered in 2006 and 2007, respectively. The latest entrants are Jaguar and Land Rover, now part of Tata Motors Ltd. The companies have been bringing in new models to gain customers.
Mercedes-Benz India will also start leasing cars to companies by the end of this year, Business Standard reported on Monday.
“This practice is also followed worldwide but it will take some time before it matures in India. But it has got some good prospects,” Honegg said.
He said Mercedes-Benz dealers will buy the cars and lease them out to corporate houses for a particular period. “Once the lease period of a particular car will be over, we will sell it through our pre-owned car business,” said Honegg. “However, we are still working out the details.”