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Hertz rental to expand in India
Smita Tripathi |
December 13, 2003
Hertz the global car hire giant is stepping on the accelerator. For more than a decade after coming to India it has crawled along in the slow lane.
Now, it's looking at expanding its fleet of 500 vehicles to over 5,000 in the next three years.
That's only one part of Hertz's route map for the future. In India Hertz cars have always come driven by chauffeurs.
Now it believes the Indian market is ready to get behind the steering wheel with self-drive vehicles. So customers will be able to walk into Hertz offices and drive away with a car of their choice.
Says Rajiv K Vij, CEO, Carzonrent, the master franchisee for Hertz in India, "Self-drive is what distinguishes a taxi service from a car rental company. World over Hertz is the largest car rental company and we plan to make it the number one in India."
Vij's ambitious plans won't come cheap. He reckons the company will invest Rs 225 crore (Rs 2.25 billion) over the next three years to buy vehicles and the infrastructure to back it. Talks are on with a financial institution for the cash.
Hertz has its route map clearly charted out. It's looking at four major areas -- chauffeur-driven cars for corporates, travel desks at hotels, self-drive and fleet management.
How large is the car rental industry in India?
In 2002, Hertz conducted a survey and found that around 150,000 cars were registered as taxis. The industry is estimated to be around Rs 3,000 crore (Rs 30 billion).
Of this only around 10 per cent is organised and includes around 20 players across the country. The big names are Avis which has tied up with the Oberoi Hotels, Travel House which has a tie-up with ITC WelcomGroup Hotels and Orix which has a tie-up with IL&FS.
Says Vij, "Most of the other players treat car rental as a secondary business meant to promote another business. For us, it is the core business."
Hertz hasn't travelled very far during the last 14 years. it made its debut on Indian roads back in 1989 in partnership with Autoriders, a Mumbai-based company.
However, its relationship with Autoriders came to an end in 1999 and in September 2001, Carzonrent became Hertz India's master franchisee.
Carzonrent was set up in 2000 by Vij and three friends who had all worked in the car rental division of ITC Travel House.
In 2002-03, Carzonrent posted a turnover of Rs 32 crore (Rs 320 million) and expects turnover to climb to Rs 100 crore (Rs 1 billion) in the next three years.
The biggest emphasis in the future will be on the self-drive segment which Vij believes is unexploited.
Says Vij, "Our survey shows that people are willing to hire cars for self drive if interesting models are offered."
Hertz has set up a few dedicated self-drive locations in the country and more are in the pipeline. For instance, there is a self-drive outlet at Chanakyapuri in Delhi which caters mostly to the expat embassy crowd.
Hertz is also setting up outlets at airports where cars are available for both self-drive and also with chauffeurs. To promote self-drive Hertz is also offering holiday packages.
It has tied up with over 60 hotels in places that are at an easy driving distance from major cities. When you hire a car from Hertz, you can take up a holiday package which is available at a competitive rate.
Another core area is the travel desk at hotels. In March this year, Hertz entered this segment. It has exclusive travel desks at several hotels including The Park and Marriott in Delhi and the Hyatt at Kolkata.
It has also entered into an agreement with the Taj Group and has set up travel desks at nine properties in four cities.
By early 2004, it will have set up travel desks at 24 different properties and hopes this will make it the leader in this segment.
Then, there's fleet management. By middle of next year, Hertz is planning to launch its own fleet management service.
Says Vij, "Worldwide cars are not purchased but only leased. I believe there is immense scope in India as besides MNCs I feel PSUs will also move to operating lease."
Currently, there are only two big players in the lease business --LeasePlan and Orix which both cater mostly to big corporate houses.
Hertz also plans to cater to small and medium enterprises and professionals. It initially plans to strike deals with companies with which it already has a working relationship.
Currently, Hertz provides chauffeur-driven cars to nearly 400 companies including IBM, Sony, KPMG, Compaq, etc.
Vij is looking at customers who feel a driver is a hindrance and he divides customers into three different types. One is the fuel-conscious customer who hires a car to go on a holiday with his family and would like a fuel-efficient car.
Second is a person who may be driving an Ikon or an Esteem, but would like to try an SUV. Thirdly, there's the person who may on special occasions like to go all out and drive a Mercedes or some other luxury car.
Around the world Hertz has agreements under which vehicle manufacturers buy back cars. In India too it has similar deals and the manufacturers buy back cars after three years.
It has taken Hertz a long time to get into high gear. Now it's getting ready to move at high speed.