Want to enter the luxury car rental business: Some key thoughts & ideas

Planning to start with 2-3 vehicles – ideally a Toyota Vellfire, a Mercedes S-Class with a Maybach Kit and a G400D / Defender 130 / Audi Q7.

BHPian LPJ777 recently shared this with other enthusiasts.

Hello to all my fellow TBhpians.

I’m an entrepreneur and petrolhead based in Bengaluru. One of my primary business ventures focuses on travel and tourism. Being a keen petrolhead, I have toyed with the idea of setting up a luxury car rental business for years. Finally, I am ready to dip my toes into it within the next couple of months.

I understand that India is not an easy market to operate in compared to Dubai, the UK or the US. However, I see the conventional players in the market (The large chauffeur-driven service providers and the wedding rental service providers doing well). There are a few select operators who do offer self-drive options but I don’t see any that are exceptionally good.

I have a feeling that most of you would deter me from going into this primarily highlighting the risks however, my thought process is that if the market has enough players who are growing and are successful then I see no reason to not enter and grab a piece of this cake.

To start with I would prefer to focus on chauffeur-driven vehicles because self-drive rental is significantly riskier but highly rewarding if you have the right cars and the right clientele but I will look at it later.

I have VVIP guests for whom I manage end-to-end transportation and almost always, it’s been a pain to arrange for a suitable luxury sedan or SUV for these guests as the current inventory in the market is not in the best shape or comes with conditions that are in conflict with my clients’ preferences which is also one of the reasons why I want to have my own fleet to cater to these clients apart from offering the same to a larger client base.

Here are some of the questions for which I am seeking answers for:

• Planning to start in Bengaluru first, any specific things to keep in mind with regard to the local market here?
• Primary services will be airport transfers, city transfers, outstation trips, corporate events, weddings, promotions, short-term leases etc. – Am I missing a potential market-segment?
• Planning to start with 2-3 vehicles (ideally a Vellfire + S Class with a Maybach Kit + G400D / Defender 130 / Q7) – Do you have other suggestions? I would like to differentiate myself from the market and offer cars that are exclusive as much as possible thereby offering a niche selection. I prefer SUVs over sedans because Bangalore roads can get really bad and I don’t want the vehicle underbody to scratch or scrape.
• Does it make sense to buy a service pack or just an extended warranty would suffice from the dealer? Any pointers while negotiating with dealers? All cars will be purchased brand-new.
• White or Black or Dual-tone? I have seen cars mostly in White or Black or should I go for a unique color that stands out and is also in line with the branding?
• Planning to keep the cars for 5 years minimum. Does it make sense to upgrade every 5 years or buy new cars and keep the older cars for lower-priced trips for the remainder of their usable life?
• Is it possible to negotiate insurance terms such as enhanced coverage with zero deductibles at a competitive premium?
• Does an experience center help? I also have a furniture retail business being setup in the city and I am planning to setup a mini experience center alongside the same where potential customers can come to experience the cars before they book it for an upcoming event or ride.
• Planning to do PPF on all cars. Is this advisable or is there a better solution to protect the car exteriors?
• Would professional woman chauffeurs add value? (Looking to offer female chauffeurs for select clients (women and children only travelling without a male escort)
• Does it make sense to also offer services in nearby cities by flatbedding or driving the cars over for specific rides (Chennai, Hyderabad, Mangalore, Kochi etc.) – Recently I brought down a GLS350D from Hyderabad for a client and so I know from experience that it’s doable.
• Am I missing something super important?

Eventually, I would like to add Bentleys and Rolls-Royces (Brand new) based on demand and also how quickly the business takes off. I don’t mind offering cars to celebrities, business owners, politicians etc. on short leases wherein they care to write off the lease an as expense while still being able to indulge themselves.

I would love to hear thoughts and inputs on how could I do this better.

Thanks in advance.

Here’s what GTO had to say about the matter:

This is really the key point = you have a ready, captive audience for your services. If this wasn’t the case, I’d tell you not to bother as the competition from established brands is high.

But since you are already offering high-end services to your VVIP guests, it makes absolute sense to add an ancillary service & profit from it.

• Vellfire – a great choice.
• S-Class – again, a great choice. Also, consider the LWB E-Class if it’s acceptable to your VVIP customers. BMW 7-Series as well due to the brand’s reliability.
• Avoid Defender due to its unreliable nature & downtime.
• You should seriously explore buying pre-owned 3 – 5-year-old cars too, and keep them in top shape from a great independent garage. Cars like the S-Class can run forever with the right maintenance.
• White colour as it’s the most neutral and no customer will ever have a problem with it.
• Keep the cars for as long as they are running reliably. BMW is the king of reliability in the luxury segment (along with Lexus, of course).
• Great idea about female chauffeurs! That will be a great USP. But even otherwise, invest in the best male / female chauffeurs you can find. Keep training them. They are the difference between a happy or unhappy customer for you, and a well-maintained or abused car.

Here’s what BHPian dailydriver had to say about the matter:

Excellent business from the prospective clients’ perspective. Rich folks travelling to the city will be happy to be chauffeured around in luxury cars for a cost. But will that be a profitable business for you too is a question that only you can answer.

Bengaluru does have such services; the one run by Mr. Ramesh Babu being a good example. Perhaps a candid talk with him could give you the required clarity.

“Ramesh has a fleet of luxury vehicles including Mercedes-Benz, BMWs, etc. in his car rental business”

” …entrepreneur runs Ramesh Tours and Travels in Bangalore and owns around 400 cars, out of which 120 are luxury vehicles. He has Mercedes Benz S Class, Mercedes Benz E Class, BMW 7 Series, Audi A3 Convertible, Audi A 7 & A 6, Jaguar XF, Ford Mustang GT and many other luxury cars in his fleet, all of which he provides on rent.”

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Here’s what BHPian ike had to say about the matter:

Do you have corporate clientele that are visiting their Bangalore locations from overseas? I have no experience with this business but I’d get an EV as well for those trying to project an environmentalist image.

The organization I work for is one of the largest in the oil and gas sector but of late, the leadership visiting from onshore were seen in EVs, an MG ZS first and a BYD next. These are the same people who used to be driven around in Mercs earlier. We also are switching to EVs for staff transport but that is beside the point.

Women Chauffeurs is a great idea and I’m sure proponents of diversity and inclusion would be very tempted to go for it I think.

Here’s what BHPian blackwasp had to say about the matter:

All the very best for your enterprise. Let me answer your queries in short.

• Always better to start in a metro city as you have a wider range of clients.
• You will first need to network around and check out the current demand for such services in your city and how you can differentiate yourself from the market. Premium customers who will rent an S-Class will be much less in number.
• Vellfire and S-Class is a good idea.
• Always go for brand new cars, retain them till you get zero-rep insurance. Sell them at the 5-year mark.
• Keep mostly white, with a couple in black as your fleet expands.
• In case of any mishap, you need maximum coverage. Commercial cars get zero dep insurance for 5 years or less (IIRC). Keep them till you get zero dep, sell them after that.
• Compared to private cars, commercial car insurance is much higher. But that said, you can negotiate for a bulk deal.
• I highly doubt someone renting an S-class would be least interested in experiencing the car. However, you can use the experience centre to showcase the cars to people who would otherwise not have access to these cars. Eg. say a 1-hour ride for a much lower price when you have no bookings.
• Yes, PPF will be a lifesaver. Any car upwards of 20L will see much higher benefit. Also, commercial vehicles will run more as well.
• Yes, this is a good niche to have. However, you will need to find a willing person to work. There are a few women drivers, but since 2019, I’ve not been able to find one for my cabs. Bluesmart has recently said they want over 1000 women drivers for their cabs, and are working with the government skills institutes to train them. Might be worth checking it out.
• You need to work out the pricing and downtime. Eg. For a 1 day Hyd rental, you will need to keep aside 3 days availability of your car.
• Unless you have a captive clientele, I would suggest not to enter this business. First start with acquiring B2B clients – who will give you regular business. Say someone like Emirates, who offers pickup drop for their premium class customers. Once you have enough business to cover the operational costs, go ahead with the vehicle purchase. Once you have the cars available, you will be able to increase your business.

I have a fleet primarily with WagonRs. All of my cars combined value won’t be able to match the cost of 1 S Class. So just be really sure of the numbers. If you are doing the maths, estimate only a 15-20 day period in a month for active bookings.

Further, you will need to keep a dedicated person and equipment to clean the car after every booking. Keep a stock of water bottles, newspapers, tissue boxes, some candy etc. The cleaning and restocking will take up some time before and after every booking. Account for this.

You will also need to keep more drivers than the cars you have. It should not happen that you have to cancel a booking for last minute driver’s absence.

Also if you have the contacts of other cabbies, inform them of your services and let them know that you have a car for hire. Offer them B2B rates. There might be a situation when an event needs more vehicles than what any one individual might have.

Forgot to add. Considering an S-Class at Rs. 1.7 cr, you are looking at an EMI of around 3.5L for a 60-month tenure. Assuming you do 20 days of 8 hr 80 km packages, you will need to price them at a minimum Rs. 20,000 just to recover your overhead (EMI + fuel + salary + maintenance + misc.) at the very least. Find out if there is a market at this price point. For comparison, an Innova Crysta for 8 hr 80 km goes for 5-6k in Mumbai from a reputed cab company. Innova costs 20L.

Check out BHPian comments for more insights and information.

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