M&M enters leasing mart with an eye on millennials

Co sees business adding 5-7% to accrued sales once the market matures

Mahindra & Mahindra (M&M) announced entry into retail leasing market in order to target the millennials who do not want to shoulder the responsibility that comes with owning a car. M&M expects this segment to add around 5-7% to its accrued sales once the market matures in the next few years. The company’s automotive division sold over 5 lakh units during the financial year 2017-18.

The car leasing industry in India is just around 1% of the total sales, and nearly all of it is to the corporate sector. In comparison, over 30% of the new vehicles sales come from leasing in developed markets such as UK (45%), US (33%), Germany (32%) and France (15%).

The challenges in India are manifold as the wear and tear of vehicles is higher due to the road conditions, accidental damages and repair costs are higher, in addition to unregulated and unorganised resale market and the changes in technology, all adding to the costs associated with mobility, analysts said.

According to an industry estimate, the car leasing market in India is estimated to be over Rs 1,500 crore and is poised for 15-20% compounded annual growth rate over the next ten years.
V S Parthasarathy, group CFO, M&M, said the initiative is not an alternative funding scheme, but a new way of owning a vehicle. “The car leasing business now makes sense after the implementation of GST (goods and services tax) as it has made credit flow seamless and brought level playing field.”

The scheme will be available on Mahindra’s personal portfolio of vehicles such as the entry-level sports utility vehicle (SUV) KUV100, compact SUV TUV300, mid-sized SUV Scorpio, multi-purpose vehicle Marazzo and premium SUV XUV500. These vehicles can be leased for a period of up to five years.

The person can later return the vehicle to the company without the hassle of reselling it, and get a new vehicle, the executives said.

The leased vehicles will be available at a starting price of Rs 13,499 per month for a KUV100NXT, going up to Rs 32,999 per month for an XUV500, it said, adding that at present customers across Delhi, Mumbai, Hyderabad, Bengaluru, Ahmedabad and Pune can avail the scheme. M&M plans to extend the scheme to another 19 cities in the next phase, it said.

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