Indian operational leasing market presents enticing opportunity
India's operational leasing market is forecast to grow at a rate of 28% annually up to 2013, to reach a total fleet of around 100,000 units. However, problems still exist in this rapidly growing sector. Datamonitor research suggests that an unorganized used car market and the lack of a developed aftermarket represent key deterrents to the Indian fleet car lease market reaching its potential.
Tweet-- India's operational leasing market is forecast to grow at a rate of 28% annually up to 2013, to reach a total fleet of around 100,000 units. However, problems still exist in this rapidly growing sector. Datamonitor research suggests that an unorganized used car market and the lack of a developed aftermarket represent key deterrents to the Indian fleet car lease market reaching its potential.
Until recently the Indian company car market has never presented a major growth opportunity. The historical importance of ownership had created a stigma against the idea of leasing. This traditional mindset left little room for the concept of car leasing, with Indian consumers preferring to purchase vehicles on credit. Although such obstacles still exist, some of the world's leading cars leasing companies have now identified India as an attractive market opportunity.
Despite the persistent problems highlighted by operational leasing and fleet management companies in India, none of them doubt the substantial growth potential of the market over the coming years. According to Datamonitor, the operational leasing market in India is forecast to grow at an average rate of 28% a year until 2013.
The local market has already attracted the presence of Europe's major brands, such as LeasePlan, ALD Automotive and Arval, and more companies are on the way.
"Even though some of the world's major operational leasing and fleet management companies have been present in India for over a decade, it is only now that this market has begun to witness competitive interest, owing to its double digit growth over the last couple of years," explains Tarun Bisht, a fleet analyst with Datamonitor.
A number of factors are fuelling the growing demand for operational leasing. Alongside the rising levels of foreign direct investment, an increasing number of local subsidiaries are being set up by multinational corporations. Foreign companies find it easier to subscribe to leasing, given their familiarity with this concept in developed markets.
Additionally, the commercial sector in India is becoming ever more competitive and consequently more companies will look to implement employee retention measures, such as those that provide tax benefits. And with companies also looking to maintain healthy financial records, operational leasing becomes a particularly attractive option as it reduces the number of depreciating assets on a balance sheet.
According to Datamonitor, less than 10% of all cars used by companies in India are funded by operational leasing. However, this figure will rise to least 25% by 2013, driven by the continued growth of the corporate car fleet.
"In Europe's most mature operational leasing markets, such as the Netherlands and the UK, around half of all corporate cars are funded by operational leasing," a statistic which, according to Mr Bisht, further highlights the potential of the Indian market.
Notes to Editor
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