Pumpumpum bets big on leased vehicles
Changing behaviour patterns and mobility preferences are giving vehicle leasing a greater thrust.The company aims to reach out to new private and corporae customers and is targeting a 50 times expansion of its fleet in three years. In sync with the latest trends in the automotive world, the company is also keen about exploring options in the electric vehicle segment.
Gurugram-based Pumpumpum, a platform for leasing vehicles plans is targeting 2,500 cars by the end of the current fiscal, and around 30,000 cars over the next three years. In fiscal 2022, the company was able to lease 500 cars.
While the concept of buying a vehicle on lease rather than owning it has yet to gather speed in India, a trio of factors is now opening up the market to players such as Pumpumpum. These factors include changing consumer behaviour, the rise of millennial and Gen Ys with disposable incomes and varied mobility preferences, and finally, the demand for mobility without the associated hassle of maintenance.
Tarun Lawadia, CEO and co-founder told Autocar Professional that “as a result of the pandemic, a lot of demand has come for vehicle subscription over the short- term.” In his view, as people were sceptical about using cabs for personal use, they want mobility solutions without having to actually own the vehicle.”
Lawadia said the company is clear about its target customers who are those wanting to drive a used car without owning it, for a short duration of between six and 24 months. Another growth factor for vehicle leasing is corporate business, which he says accounts for almost 70-75 percent of customers.
Sameer Kalra, who co-founded the company and is its CGO says the share of leased vehicles in the entire automobile sector, at present, does not even account for one percent though "leasing as a product or subscription is designed to solve all your hassles around the experience of ownership."
Explaining the leasing business, Kalra attributes the tepid response to leasing to the fact that cars in the leasing business are usually registered in the name of lessee, which means the company takes the car on lease. Most of these organisations do not operate in the retail sector, which means the lease is dependent on the customer's employment with the current lessee. Lastly, in the current scenario, few customers work at jobs for long periods running say to five years, and so the potential user base is limited.
"As a result, of the 8-10 percent who are eligible for the vehicle leasing policy, only about 5-10 percent opted for a lease. Hence, you see a very small penetration of the total leasing," explained Kalra highlighting why it makes sense for them to offer a provision (for corporate customers) that allows the user to continue with the vehicle in Individual capacity even after the person may have left the job.
According to Kalra, "Companies are now considering extending this policy to 40-50 percent of its employees, which technically expands the market. With our business model, we are able to expand the market up to around 750,000 cars and this is just corporate business."
So how does this Gurugram-based platform service project its business growth? At present, the company has retail operations in Bangalore and Delhi-NCR but by leveraging its partner network, it has expanded to more than 55 cities. The key requirement is to have a good quality service network partnership in place.
On the retail side, Lawadia pointed out that the company is already kicked off its corporate leasing programme in Mumbai, Hyderabad and Pune while a retail leasing program is expected to start soon.
In a bid to be financially viable, Pumpumpum is working on asset-light business model, "Based on the channel partner’s inventory, customers can see what all cars are available. We never come under any ideal inventory kind of risk which for a rental fleet company is the other way around where they acquire a vehicle first, and then look out for customers. That's the reason the key metrics for rental companies) is the occupancy rates to assess whether or not they are doing good or bad. But in our case, it is almost close to 100 percent because there is technically never any car that we will buy without any customer requirement."
Kalra explained that the lease plans are designed in such a way that the leasing tenure depends on the average movement of the inventory. This means that for high- demand models, the minimum tenure could be as low as 6 months, which goes up to 24 months for a premium luxury car.
Given that many potential customers may want to lease an electric vehicle, Pumpumpum believes it can play a role here too. The co-founders agree that while there are challenges for adoption in the retail space, it makes more sense for a B2B customers who may want to lower costs associated with ownership and overall maintenance.
According to Lawadia, "We are aligning all the B2B players and have given out EVs on lease to them. At present, 30 percent of our existing fleet consists of electric vehicles, which is a mix of new and used cars. There is a lesser availability of used electric vehicles and that's why we have to build our understanding by getting into the new electric vehicle fleet. We are also looking to expand this entire electric vehicle purely on the B2B side."
As Kalra says, "From the overall perspective, the challenges for used car and electric vehicle adoption remain the same. The risk of ownership, range anxiety, resale value risk are factors that matter, and nobody knows at what price these cars (EVs) will sell. The challenges are similar and the platform that we are building is specifically to address them. Hence, EV adoption automatically makes a lot of sense through the leasing route, wherein the person doesn't own the vehicle for its entirety, but owns a certain portion of the journey while he wants to experience driving a green vehicle," says an optimistic Kalra.
The feature was published in Autocar Professional's May 15, 2022 issue.
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