Life In The Fast Lane
Car Rentals In India Come Of Age
Growing demand from the business travel community has put
the Indian car rental industry into overdrive. Neeti Chopra checks out
the reasons for this increasing popularity and outlines the future of this segment
important part of smooth business travel, indisputably, is efficient intra-city
commute. If travelling to a meeting venue in an unfamiliar city becomes a hassle,
chances are that the distress will ruin the business deal that you are going
Corporate leaders, therefore, recommend renting cars while on business visits,
especially if you are visiting a new city or country. The concept of car rentals,
already a big hit in the West is slowly entering the business culture on the
Indian shores as well. The concept of car rental has picked up in the subcontinent
in the last couple of years and global giants in this segment are now stepping
on the accelerator after crawling in the slow lane for more than a decade. Not
just hiring of cars, these companies believe that the Indian market is now ready
to get behind the steering wheel with self-drive options as well.
to Hertz India, the total size of the Indian car rental industry today is pegged
at Rs 4,000 crore annually. It is highly fragmented with an approximate 2,00,000
cars registered as taxis and the organised sector comprising a mere two per
cent of the total and contributing 10 per cent in terms of value.
Drastic change in the Indian economic scenario, growth of
tourism and the aviation industry, and improvement in road conditions in recent
years have played their respective roles in fuelling the growth of car rentals
in India. Rajiv K Vij, CEO of Hertz India, says, "With globalisation of
the Indian economy and more Indians travelling overseas on business and leisure,
this segment of the travel industry is heading north. Moreover, the value of
brands in terms of quality and reliability of service is being appreciated today,
which has also contributed to the growth of this sector. On the sidelines of
these upswings, the infrastructure in the country is also developing and this
will further boost the growth of this sector."
|The main factors that are emerging as differentiators
in the Indian car rental market are:
Branding And Affiliation:
International branding is important as most multinational companies and
worldwide frequent travellers like to use the same company and get advantages
in terms of rates, other benefits and recognition.
Network: It is important
to be able to deliver the service over a wide geographical spread in order
to give the customer the benefit of expecting the same service levels
across the network, and the possibility to reserve a car from the customer's
home location for any other city in the world.
Legality: Is the car
rental company legal and above board in terms of having commercially registered
cars, having insurance for chauffeur, passengers and third party liabilities,
as well as paying minimum wages or more and meeting all statutory obligations
like PF, ESI etc.
Reliability And Consistency:
The car must turn up at the appropriate time and place, should be of a
certain standard in terms of age, cleanliness and mechanical condition.
In terms of grooming, politeness, communication and driving skills, geographical
knowledge and service orientation and the assurance of the chauffeur being
reliable and one whose antecedents have been checked and verified.
Ease Of Rental: Customers
are increasingly demanding convenience in terms of reservations, confirmations,
service options, billing and payment methods etc. Technology is therefore
becoming increasingly important to deliver ease of rental to the customer.
frequent travellers today are used to getting benefits when they associate
with a particular brand in terms of hotels/airlines etc. Major car rental
companies have global partnerships with almost every major airline and
hotel group whereby you get discounts and Miles on your existing frequent
flier memberships. In India, Avis is the only car rental company to have
worked out a partnership with Jet Airways where you get discounts and
JP Miles when you rent an Avis car. Similar partnerships are also planned
with American Express on the Amex Indian Airlines card and with several
other hotels and airlines.
Capitalising On The Potential
Indian car rental industry is predominantly chauffeur-driven and largely unorganised.
Most operators have a fleet where some cars are commercially registered and
some are not, some cars are insured and some are not, some chauffeurs are reliable
and some are not. In most cases chauffeurs are not even paid minimum wages.
Such companies are not completely legal but still continue to operate in the
On the other hand, there are only a few among the organised players like Avis,
Hertz, Orix, Autoriders, Travel House and LeasePlan India that offer professional
service and add-ons. For example, Hertz India offers a number of facilities
to its clients including daily rentals, local usage, airport transfers, long
term rentals (weekly, monthly and yearly), fleet management services, inter-city
travel and one-way rentals. Its fleet includes a wide range of vehicles from
Tata Indica to Mercedes Benz.
|Almost all ranges of cars are available. If
you take Avis India as a case study then there are seven categories which
have different price bands (Average rate for 8 hour 80 km or Self Drive
for 24 hours). Cars in the economy category include Suzuki Wagon R, Tata
Indica, Hyundai Santro and the rental charge per day is Rs 1,200. The standard
category, which includes Opel Corsa, Ford Ikon, Maruti Esteem, Tata Indigo
the rental charge per day is Rs 1,800.
Top end cars like Toyota
Camry, Honda Accord, Grand Vitara, Hyundai Terracan, Honda CRV, Ford Endevour
command a rental charge of Rs 4,500 while the Mercedes E 270 is priced
at Rs 6,500.
As per Hertz, the requirements
for a car on self drive is that you have to be above 25 years, have minimum
three years of driving experience, Indian or international driving license,
one valid credit card in which a sum between Rs 10,00 to Rs Rs 25,000
depending upon the model will be blocked at the time of the start of rental.
Considering the growing potential, Hertz International has
major expansion plans in India. Present in the country since 1980s, it appointed
Carzonrent India as its licensee in 2001. Starting with a fleet of 50 cars and
single unit operations in three cities, Hertz today operates 25 units across
the country and a fleet of over 750 cars in various categories. Avis India,
another international car rental brand, claims that it is the first and the
only car rental company in India that has an international partner with a strong
hold in the country.
In India, Avis operates in a joint venture with Oberoi Hotels. With a fleet
of 575 cars, a major chunk of its business comes from airport transfers, overseas
and outbound travellers and mini-leases. Ravi Lamba, CEO of Avis India, claims
that the company has a "cultured focus". "We are not hung up
on what is the current scenario but focus on what it is going to be the future.
A big part of the future is Avis' attention to services. Customers are looking
for a complete network both in India and overseas, reliability, professionalism
and strong infrastructure in their car rental partners. Slowly, customers are
realising that they cannot compromise quality and reliability over cost,"
he adds. Avis India's car models start from a Ford Ikon which costs Rs 800 for
an airport transfer to Rs 1,600 per day with a chauffeur for eight hours. If
customers hire a car from Avis India for self-drive for six days, then the seventh
day is offered free. If customers plan to hire a Mercedes for a day, then they
must be prepared to shell out Rs 6,200. Unfortunately, these cars are not available
Both, Avis and Hertz, block a certain amount from the client's credit card as
security. Customers are lent cars with full tank and are expected to return
it with a full tank.
Internet has opened the floodgates of opportunity for car rental companies and
has helped companies remove barriers to customer acquisition, thereby simplifying
the purchase process. It tends to foster transparency and greater the transparency,
the less differentiation there is among rental companies and their products.
Lamba explains, "Internet's influence has shifted markets and segments,
transformed revenue streams, and improved operations and customer service. For
smaller rental companies, e-commerce has also increased profit opportunities
and promoted brand awareness that was previously off-limits." The role
of customer loyalty has also started diminishing in such a market as a result
of which, brands are becoming more price-sensitive.
He adds, "Avis is very strong as far as infrastructure and network is concerned.
Being the only car rental company to have invested in the Indian market through
a joint venture, it is committed to a long-term investment in the market. We
are using technology for our reservations and delivery to provide convenience
and consistency to our customers. We have also refurbished our website and will
be investing Rs 50 to 60 lakhs for front-end reservation systems."
Avis India offers reservations on the Net with a secure payment gateway that
enables delivery of the car at any of its 5,400 locations in 174 countries worldwide.
Nearly 35 per cent of the reservations come through the Net or Global Distribution
Systems (GDS) such as Amadeus and Galileo.
Hertz has also tried to make bookings in India easier for the end user. Carzonrent
India, the sole franchise for Hertz International in India, is the first car
rental company to launch a toll free number and a single landline number across
the country for reservation of its car rental services. The company has also
announced the launch of its website (www.carzonrent.com) for better customer
Such services will help independents compete in the marketplace
until they can update their own Web capabilities. Ultimately, the goal must
be to provide customers what they've come to expect - a Web page with drop-down
menus that give customers the kind of information they want, when they want
it, from a central database. Those who refuse to integrate technology within
their business model and pursue a niche Web strategy will perhaps risk the viability
of their business.
|Most Indian customers are familiar with the chauffeur-driven
option, however for the self drive option some of the must-knows are:
- Insurance - Is there any insurance
cover included in the rates?
- What is the customer's liability in the event of damage or theft of
- License Requirements
- In most countries an Indian driving license is considered valid if
held for over a year. However in some countries an International Driving
License is a specific requirement without which a car may not be rented.
- Documentation - Usually the documents
required are a valid driving licence, passport and credit card. However
we must check for exact requirements in a specific country and location,
prior to the rental.
- Method Of Payment - Most credit
cards are accepted worldwide. However some countries/locations may not
accept charge cards. Most rental locations do not accept cash as a valid
method of payment.
- Rate Inclusions
- The rates for self drive usually include the basic rental, insurance
(collision damage waiver and theft protection), surcharges and taxes.
However there are many optionals like enhanced insurance and fuel prepayment
available across the counter at the time of rental. The customer must
make sure that he/she knows exactly which inclusions are being purchased
and whether they are really needed.
- Non-Waivable Excess - This is the
amount which is the customer's liability in the event of damage/theft
of the car. However there is usually an option to reduce this by purchasing
insurance enhancements where available.
- One Way Fee - If a car is returned
at any location other than where it was rented from, there is usually
a one way fee which applies. While it is mostly included in the rates
offered, the customer may want to check the practicality and price alternatives
in case the trip is planned differently.
A Drive For Self-Drive
self-drive market and medium term rentals are the latest trends witnessed by
the industry. However, according to Lamba, few people opt for self-drive since
the difference in costs between this and chauffeur-driven cars is not much due
to cheap manpower available in India. "But this trend is now picking up,"
he adds as an afterthought.
According to a study conducted by Hertz, the concept of self-drive is at a nascent
stage but has a lot of latent demand. Vij says, "Self-drive rentals in
India is one area where there is tremendous growth potential. This market in
cities like Bangalore is quite active and we are looking at expanding our user
base in Mumbai and Delhi as well." To hire a Hertz self-drive car, one
has to be above 25 years with a minimum of three years driving experience. Customers
are also required to fuel on their own expense. Rates for hiring depend on the
car model, time frame and the city.
However, the challenge is to create awareness among travellers about its availability.
Vij says, "We conducted a survey among corporate executives in the age
group of 25-35 and found that 90 per cent of them had no clue that self-drive
was available in India. An equal percentage said that they would love to have
the facility." Hertz is, therefore, planning to introduce a special programme
for self-drive in the high-end SUVs and cars segment that would come with a
number of value-added services in related areas. It is also working towards
developing the growing leisure market both with chauffeur-drive and self-drive
more aggressively, with particular emphasis on the latter.
Alternatively, car rental companies are also exploring other avenues. They are
tying up with tour adventure companies and offering cars for jeep safaris. For
instance, Avis has tied up with Mercury Himalayan Adventure and provides its
cars on self-drive to groups conducted by the adventure outfit. Lamba says,
"This year, we have done trips from Manali to Leh in Ladakh and Srinagar.
The vehicles are used on self-drive basis and the group members are allowed
to drive in the countryside and get a taste of some off-road driving with a
sense of adventure."
Another industry trend is a move towards radio cabs. Vij says, "This trend
is bound to pick up in cities like Mumbai, Delhi, Hyderabad, Bangalore and Chennai
where it already exists but in a fragmented manner. Some large players need
to enter this particular segment and set up GPRS-based infrastructure, which
will boost radio cab operations." Services like fleet management and vehicle
leasing for corporates by international players is also catching on in India.
As of now, there are 50,000 cars that are bought by corporates, of which only
5,000 cars operate on lease and fleet management.
Brands Or Non-Brands?
Provided that India will continue to witness a strong economy, the car rental
industry is expected to register an annual growth of 24 per cent over the next
three years. According to industry experts and global operators, the focus will
be on international standards with the branded segment all set to have a larger
share of the expected growing pie.
The concept of car rentals has gained credibility and this is in no small terms
due to the advent of the large global players. While smaller players still primarily
dominate the market, there has been a visible shift by both the corporate and
the leisure segment to use branded services. This is all the more prevalent
in companies who are looking at consistency in products and services across
the country. Hence, the credibility factor will be even more important in the
near future and companies will need to ensure that their cars are well-maintained
and safe. Users do not merely see cars as a mode of transport between two points
but look for security of a trusted name.
Traditionally, a large percentage of car rental contracts continue to be directly
signed by corporate companies. However, looking at the shift in service expectations
from travel agents and operators where there is more emphasis on them being
a complete travel consultant rather than just acting as agents for airlines,
there would be a lot more interaction and joint presentations so as to help
expand the distribution parameters. All said and done, the sheer ease and comfort
of the car rental system beats the disadvantages, if any. Today, business travellers
can choose from any vehicle, from an SUV to a Mitsubishi Lancer, and it would
be just a phone call away.