Mahindra takes the leasing route to grow PV sales

In a strategic move designed at accelerating sales, Mahindra & Mahindra today announced the introduction of a leasing option for retail buyers. This, the company says, will provide a unique ownership experience for customers of its passenger vehicles.

The company will expand purchase options and make the ownership experience of these vehicles affordable and convenient. In the initial phase, M&M will offer a monthly lease rental starting at Rs 13,499 per month for its KUV1OONXT and Rs 32,999 per month for the XUV 500 (all rates for Mumbai region). The lease plans starts from Rs 10,000km/year with nominal charge for additional kilometres.

M&M says that the benefits of the leasing option to the customers include total convenience, lower or no down payment, zero risk on resale value of the vehicle and a fixed EMI that is inclusive of the maintenance cost. As a result, the company claims that leasing will gain increasing acceptance in the market and offer greater convenience as compared to actually owning a car. So a customer who has entered into an agreement with M&M will be able to pick any vehicle at zero down payment or a lower amount as compared to the standard practice.

It also makes the entry easier with no initial down payment, as the customers also have the flexibility to upgrade their models. Once the lease scheme is over, the person can return the vehicle to the company without the hassle of reselling it and get a new vehicle. 

As part of the lease offering the rental cost will include services such as insurance, end to end maintenance, on-road assistance, accidental repairs, replacement of vehicle in 24 hours and among others. This will ensure a hassle-free experience while using Mahindra vehicles. 

The lease offering will cater to individual leasing for working professionals, SMEs and will be available across six cities -- Pune, Ahmedabad, Bangalore, Hyderabad, Mumbai and New Delhi in the first phase of launch. In its next phase, the lease offering will be extended to 19 more cities across India. The lease offer will be available on Mahindra' s personal portfolio of vehicles such as the KUV100, TUV300, Scorpio, Marazzo and XUV500.

The company has partnered with Orix and ALD Automotive, and the leased vehicle will be available for a period of up to five years, depending on the city and model selected. As per the agreement policy, the ownership of the vehicle remains with Mahindra & Mahindra but the registration will be in the customer’s name with the bill generated by Orix.

Speaking on the introduction of lease offering on Mahindra's personal range of vehicles,V S Parthasarathy, Group CFO and Group CIO, Mahindra & Mahindra, said, “Our leasing model is a category creating product offering, a ‘no-worry’ experience for customers who prefer convenience over ownership. It aims to bring a new class of customers, including professionals, small businessmen and millennials, into the M&M car experience. Going forward, I am confident that leasing will gain more currency and the penetration levels will move in line with global trends." 

Parthasarathy further stressed that GST has played a major role in their decision to launch the leasing platform now as the previous pre-GST tax structures had made the entire leasing option unpopular. With GST, there is now a proper flow of the credit from the service proved to the end customer. He also said that Mahindra’s dealerships will have exclusive executive personnels to handle the customers interested in leasing of vehicles.

Veejay Ram Nakra, chief of sales and marketing, Automotive Division, Mahindra & Mahindra said, “We are happy to introduce this unique leasing offering for our retail customers in association with Orix and ALD Automotive. Our lease offering for retail buyers aligns with our larger vision of transforming the face of mobility in India, with disruption being at the very core. With this offering, we hope to help our customers fulfil their aspiration of driving their desired vehicles without necessarily owning them, thereby elevating customer engagement experience to the next level." 

He further adds, “There is a declining preference for physical asset ownership and there is a decrease in the length of the ownership of the car with newer models emerging at a faster rate. With a flexibility to lease the vehicle for a minimum of 3 years, we have arrived at rates for our vehicles that are lower than the monthly amount of the loan EMIs and other affiliate costs such as insurance and servicing.”

M&M says that while leasing in India has been a known concept in many other segments, it is slowly picking up in the automotive sector as well. It estimates that at present the penetration of car leasing in the country is less than 1 percent, compared to developed nations where it is as high as up to 45 percent. Over 30 percent of the new vehicle sales come from leasing in developed markets such as UK (45%), US (33%), Germany (32%) and France (15%). M&M sees a large opportunity in the corporate sector followed by the salaried population.

M&M expects that with growing ownership cost of mobility and a penchant for customised services, the subscription-based model will set new ground rules for acquisition of vehicles.