PRESENTATION BY SIAM organized Round table on leasing 22 nd July, 2004

SECTION 1 : INTRODUCTION SECTION 2 : GLOBAL MANUFACTURER PERSPECTIVE SECTION 3 : INDIAN MARKET SITUATION SECTION 4 : ROAD AHEAD CONTENTS

SECTION 1 : INTRODUCTION

Leasing as a product has been accepted by customers ( especially the corporates) going in for Automobile procurement globally because of ~ It’s “capital saving” power It’s “off- balance sheet” magic & It’s “ tax efficient” stance LEASING ~ Why look at this product at all ? HOWEVER IN MOST OF THE CASES THIS IS ONLY A PART OF THE BIGGER SOLUTION THAT THEY LOOK AT !

The Bigger Requirement however lies in a complete “Vehicle Life Cycle “ Based support tool AcquisitionDisposal Operations ( II ) LEASING + VEHICLES ACQUISITION BASED SUPPORT OPERATIONS MANAGEMENT REMARKETING ( I ) (I I I ) Need : (a)Competitive Rates (b) Tax efficient structure © Reduced hassles Need : (a) Reduced hassles ; (b) Outsourcing of non core jobs ; © Cost control Need : (a)Off load asset risk (b) Reduced disposal hassles

In order to address the customer needs - for the automobile industry globally “LEASING” is not a stand alone product but is an important component of a broader spectrum of services called ~ FLEET MANAGEMENT ( vehicle life cycle based complete fleet solution) LEASING ~ from a manufacturer’s perspective

SECTION 2 : GLOBAL MANUFACTURER PERSPECTIVE

Global Market Polarization INDEPENDENTS THEY ARE NORMALLY BANKS & FINANCIAL SERVICES SPUN OFFS THEIR INTENT IS TO CROSS SELL THIS PRODUCT ALONG WITH OTHER PRODUCTS TO THEIR EXISTING RELATIONS BASED CLIENTS SO AS TO INCREASE “ REVENUE PER CLIENT “ E.G. – ING LEASING, GE CAPITAL FLEET SERVICES, ARVAL PHH, ETC CAPTIVES THEY ARE VEHICLE MANUFACTURER PROMOTED INITIATIVES THEIR INTENT IS TO USE THIS AS A STRATEGIC MARKETING WEAPON TO SELL MORE CARS E.G. – GM, BMW, VOLKSWAGEN, DAIMLER CHRYSLER, ETC

While using Fleet Management as a tool designed to meet Customer’s need, Manufacturer’s use this a strategic marketing tool too for ~  CREATION OF CUSTOMER RETENTION BY USING THIS AS A RELATIONSHIP MANAGEMENT TOOL  ENHANCING THE VALUE PROPOSITION OF THEIR PRODUCTS AND THEREBY PROTECTING THEIR MARKET POSITION  ENHANCING THEIR BRAND LOYALTY BY CONTROLLING THE TOTAL COST OF OWNERSHIP COMPONENT Fleet Management as a Strategic tool

Passenger Car Manufacturer examples KEY OEMs I.GENERAL MOTORS II.VOLKSWAGEN III.BMW IV.DAIMLER CHRYSLER THEIR FLEET MANAGEMENT INITIATIVE I INTERLEASING / MASTERLEASE II EUROPCAR FLEET SERVICES III. ALPHABET IV DAIMLER CHRYSLER SERVICES FLEET MANAGEMENT

SECTION 3 : INDIAN MARKET SITUATION

Characteristics of Indian Market  THERE IS STILL AN INHERENT INTENTION TO “OWN ASSETS”. IT WOULD TAKE SOME TIME TO SHIFT MINDSET FROM “ OWNING “ TO “USING “  HANDFUL OF PLAYERS PROMOTING THIS PRODUCT, MASS SCALE PRODUCT AWARENESS LEVEL NOT THERE – THIS LIMITS EXPONENTIAL MARKET GROWTH AS ACCEPTANCE TAKES PLACE IN “POCKETS “  ACCOUNTING GREY AREAS AND REGULATORY HURDLES COME IN THE WAY. GOVERNMENT IS YET TO PLAY AN ACTIVE ROLE TO NURTURE GROWTH OF THIS CONCEPT. THIS WHERE “SIAM “ CAN PLAY AN ACTIVE ROLE.  DEPRECIATION RELATED DISCREPANCIES WITH RESPECT TO TAXI SEGMENT ( 40 % Vs 20%) – PREVENTS IT TO BE USED IN THE LARGEST “ USING “ SEGMENT OF THE INDUSTRY

SECTION 4 : ROAD AHEAD

The Key issue Operations Management ( fleet management minus leasing ) would require the following to make Indian Corporate customers sit up and notice ~ Cost competitive products “Top of the line” service delivery Extensive Awareness and Promotional drives Leasing on the other hand would require a lot of accounting related clarities and regulatory related support so as to provide comfort to those people who are aware of the benefits but are afraid to try this out

Road ahead  IT IS A MATTER OF TIME BEFORE OTHER MANUFACTURERS JUMP IN, LIKE MARUTI N2N– EITHER ON THEIR OWN OR THROUGH ASSOCIATIONS. THIS WOULD LEAD TO A HIGHER CONCEPT AWARENESS DRIVE – LEADING TO INCREASE IN MARKET SIZE – THIS WOULD IMPROVE PRODUCT AND SERVICE DELIVERIES.  REGULATORY HURDLES NEED TO BE ADDRESSED BY THE GOVERNMENT IF THEY WANT THE LEASING PRODUCT TO GROW – WHICH IN TURN WOULD HELP IN EXPANDING THE MARKET AND WOULD IN TURN COMPENSATE THEM FROM REVENUE ANGLE  ACCOUNTING GREY AREAS ON INTERPRETATION NEEDS TO BE CLEARED WITH EXAMPLES AND CLEAR INSTRUCTIONS BY “ICAI” SO THAT NOTHING IS LEFT TO THE AUDITOR’S INTERPRETATION.

Thank you