India Insight

Car wraps lend colour to India’s drab auto business

February 21, 2014

Rohit Gulati always wanted to buy a car that would have enough space for all eight members of his family. But with his limited savings, he didn’t see that happening for some years.

In August, the 34-year-old Café Coffee Day supply chain executive, spotted a newspaper advertisement about a new car financing program. Four months later, Gulati was ferrying his family across New Delhi in a new Maruti Eeco.

EMI Free Car, the financing firm that helped Gulati, builds on the get-paid-to-drive concept in which owners are paid money to put up advertisements on their cars.

The company puts up vinyl ads on the exterior of a new car and makes 36 monthly payments (called equated monthly instalments or EMIs) on a five-year bank loan on behalf of the car’s buyer. In return, the owner has to drive the car for a distance of at least 1,500 kilometres each month.

India’s burgeoning middle class has long viewed an automobile as a step up the social ladder or a status symbol, often using bank loans to finance their cars.

But inflation, rising fuel prices and high rates of interest have hurt customer sentiment, with car sales in India falling in 2013, the first time in 11 years. Sales in the world’s sixth largest market by unit sales dropped 7.6 percent in January, the fourth straight month of decline, according to numbers released by the Society of Indian Automobile Manufacturers (SIAM).

But companies like EMI Free Car may boost the auto sector by wooing first-time buyers who wouldn’t have otherwise bought a car.

Sachin Rastogi, the founder of EMI Free Car, said they helped nearly 50 people in New Delhi and its suburbs buy new cars in February. More than 4 million applicants are in line.

“Some 150 people have come to office in a day and that too in the last seven-eight odd days only,” Rastogi told India Insight at his 15th floor office in south Delhi as customers arrived with queries. While much of the firm’s profit would come from auto wraps, they are also in talks with car dealers, banks and insurance companies, the 30-year-old said.

Rastogi’s brother and company co-founder Ruchin said EMI Free Car plans to extend the program across the country and hopes to make 500 million rupees (nearly $8.1 million) in revenue from car wraps by March 2015.

While in its initial stages, the company’s business strategy seems to be gaining traction in the Indian market, despite inherent misgivings about buyers risking ridicule because they flaunt such ads.

Gulati, who works at Café Coffee Day, India’s largest coffee chain, and bought a car priced at 458,000 rupees (nearly $7400), has no complaints. Rastogi’s company is paying nearly half of his bank loan.

“The car I have bought solves my utility purpose. I don’t care what people are going to say and I don’t want to show off,” said Gulati.

“They are paying me for posting an advert. The money which I would have otherwise invested in EMIs, I can use it for more important purposes – for my family, mediclaim, LIC (life insurance) or to pay my son’s fees or educate him.”

Indias automobile industry also welcomes any innovation in car financing.

“I think innovative sales and marketing techniques are always welcome. If it results in higher sales, incremental sales in the passenger vehicle industry then why not. Everything is try-able,” said SIAM director Vishnu Mathur.

There are still plenty of customers who would rather buy a car the traditional way. Vinyl decals have usually been on radio taxis and many say they would not want to spoil their personal cars with unwanted branding even if it meant getting a discount.

Rupam Choudhury, a 30-year-old doctor in Delhi, said he would think twice before buying a car with advertisements on it.

“I think how society takes it, that is the issue … If I go for a conference with 100 doctors and all are coming with their own cars and I am with my own car with (an) ad of something, both sides of my car,” said Choudhury. “That looks a little awkward.”

(Editing by Tony Tharakan and Robert MacMillan; Follow Sankalp on Twitter @sankalp_sp, Tony @tonytharakan and Robert  at @bobbymacReports | Disclaimer: This article is website-exclusive and cannot be reproduced in any form without permission)

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