[manjith_pm]

Hi,

Received the following Mail from Zoomcar yesterday.
Anyone who has inquired about the same?

I have mailed them and expecting a reply soon, but thought bringing this to the knowledge of the members will benefit them and the discussion would help us weigh out the advantages or otherwise.

Dear Zoomer,

We’re pleased to write to you with a very special opportunity to participate in an exciting new program from Zoomcar.

We know that you love Zoomin’ around town in our self-drive vehicles, but what if we told you that there was a way to obtain a permanent discount on your Zoomcar bookings while also earning some extra income? Sounds too good to be true? Well, with the new Zoomcar Associate Program (ZAP), this opportunity is now becoming a reality!

With ZAP, Zoomcar allows individuals to purchase one or more vehicles, lease the vehicle(s) to Zoomcar, and then share in the revenue as we run the car on our platform over our standard operating period. Think of it as an all-new asset class for you to invest your hard earned money in. In addition to this monthly cash return, we will also throw in an extra goodie: 25% off all your weekday Zoomcar bookings for the entire 30 month lease tenor!

For ZAP, it’s possible to avail a bank loan (through our preferred lending partners at advantaged rates) or purchase a vehicle outright in cash. Once you provide the initial investment, the Zoomcar operations team will take care of 100% of the operating modalities. So you can just sit back and share in the fruits of our collective efforts on a monthly basis. Suffice to say, given our scale, we can always obtain the best deals on vehicles and their maintenance so we both save money

Please email us at zap@zoomcar.com to learn more about the operating details of this exciting new scheme. Together, we’re confident that we can continue to redefine the self-drive car rental market in India.

Thanks again for your continued support!

Regards,
Zoomcar Team

What would be the risks involved?

Do you think it will be a fixed payout or on the basis of usage? Was looking at this as a Novel Investment idea,even though I don't see a big return considering it still is a Depreciating Asset, but atleast as a highly profit making company investing- would we be able to look at depreciation benefits and the like?

Also what happens to the car after the initial lease?

TIA

[swiftnfurious]

Interesting but beneficial for us? I don't think so. These vehicles will be abused to the core and we'll mostly have no choice but to sell it off after the lease period. Now, if the car has run a lot in such a short period, buyers will think thrice before even looking at the car and finally, this will go for a low re-sale price.

I haven't even thought about the payment I get thru the partnership deal and I am already convinced this may not be great!

Getting a 25% discount on the rental? Excuse me, I just bought a car and I am paying the EMI. Now, inspite of this, I have to "rent" some car and pay much more than what I'd incur with my own car. I fail to see any advantage.

This scheme is advantageous for Zoom car as the investment (capital) is pretty low and then they don't have to bother with the re-sale either.

[iamahunter]

.. earning some extra income?

Will it be fixed income or will it vary on how much is my car used?

With ZAP, Zoomcar allows individuals to purchase one or more vehicles, lease the vehicle(s) to Zoomcar, and then share in the revenue as we run the car on our platform over our standard operating period.

Can it be extended or reduced?

25% off all your weekday Zoomcar bookings for the entire 30 month lease tenor!

Why not include weekends, that’s when most of us rent cars.

I doubt if any first time car buyer would be getting into this, until he/she wants to ”really” invest in it.

As righty pointed out by swiftnfurious, these cars would be used roughly and would have a very less value in the used market segment.
The only concern is how much zoomcar would pay you monthly to make the car as in investment.

[SmartCat]

It is monthly income + 25% discount. Sounds like a decent deal.

Does it have to be a new car?

If they are accepting old cars, it makes sense for somebody who owns 5+ year old car (especially if it has low resale value) to sign up for this program.

[audioholic]

This is more of an investment invite than any ownership stuff. Like running your own taxi under someone. Forget any ownership experience or TLC like how we take care of our own cars

Originally Posted by iamahunter

As righty pointed out by swiftnfurious, these cars would be used roughly and would have a very less value in the used market segment.

You will be selling it as any other 3 year old taxi. So the amount of kms it has run might be more, which is again not comparable to a 3 year old personal car. Yellow board is yellow board. So it will have less value. Maybe some taxi guy will be interested in the car. Also depends upon the car you decide to lend. If its like say an innova or a Swift, you can expect good resale compared to say an XUV or a Honda Amaze which arent favourites in the taxi segment.

Originally Posted by smartcat

It is monthly income + 25% discount. Sounds like a decent deal.

Does it have to be a new car?

If they are accepting old cars, it makes sense for somebody who owns 5+ year old car (especially if it has low resale value) to sign up for this program.

It will be a car on black and yellow plates. New car and will be used for three years. Only the income part is interesting. If they are providing a fixed minimum income which will be more than the EMI to be paid to the car, it will make sense to invest in this scheme. These startup days, who knows, you might make some money out of their funding

[libranof1987]

To be used in the ZoomCar fleet, it would have to have black/yellow plates, correct?

This might turn out to be a big mess in case you ever want to use the car back as a personal vehicle.

[ajmat]

What happens when a car has an accident?

How does your income get affected when car is sitting in a police station and Zoom does nothing about it?

What about liabilities with your being the owner of the car?

[Rehaan]

In a nutshell, this seems like ZoomCar is looking for a way to reduce their capital expenses, and is willing to share profits to make it happen.


If the profits paid to the regular joe are > EMI for the new car. It makes sense.

If the profits are close to the EMI, it still might make sense - keeping in mind resale value for the car at the end of the term.


However, what real advantage does this have to the regular joe who wants to invest money? Why wouldn't he invest elsewhere?


Another thing that isn't clear is, say you buy a Scorpio, and zoomcar already has 100 in their fleet -- yours would probably only be given out if there were 101 people wanting a Scorpio on a particular day. Why would they split the profit when they could have the whole thing?

Need some clarity there...

[mrbaddy]

I too got a similar email.

I replied them asking for more written information. Lets see if they get back.

[Nilesh5417]

Like all investments, its best if the money is not borrowed i.e. you are not paying an EMI.

But if you take a loan (at preferred rates Zoom gets you), given the 30month tenure (2.5yrs) that the car will be run by Zoomcar, you will have to take a loan of less than that tenure for sure. That going to mean an EMI of around 20-22k assuming you take a loan of 5lacs@8% for 2.5yrs. So the loan costs you 6.6lacs.

1. OTR of of Ford Figo - 6lacs (trend?)
2. You cost of acquisition - 1lac DP + 6.6lacs paid for a 5lac loan = 7.6lacs
3. ROI on your investment, say 25% of 7.6lacs = 1.9lacs
4. Zoom needs to pay you back = 1.9lacs + 7.6lacs = 9.5lacs i.e. about 32k/mth for 30mths

Now not sure if Zoom pays for upkeep of the car or you do. In which case you add that costs which means Zoom needs to pay you more than 32k/mth.

Now if you had not taken a loan, your ROI would have obviously been more assuming Zoom pays a 32k/mth constant.

Does the math sound proper?

[GTO]

Ah, smart 'asset light' model as they say .

This could work out well. Zoomcar is growing and they have a healthy customer base. I remember reading that their operations in Mumbai, Bangalore, Delhi etc. are profitable. One thing for sure - your car will be busy.

Say someone has 7 lakhs to invest. A fixed deposit will get him 8% right now, which is only 56k a year or 4.7k a month. On a car rental, he can make significantly more $$$, enough even to cover up the cost of depreciation. But that's just the potential we're speaking of. Until Zoomcar shares more details on the earnings, we're going nowhere.

This paragraph has a subtle underlying meaning to it:

Think of it as an all-new asset class for you to invest your hard earned money in. In addition to this monthly cash return, we will also throw in an extra goodie: 25% off all your weekday Zoomcar bookings for the entire 30 month lease tenor!

Instead of buying your next car, lease it to us. When you want to drive, rent from us! Renting a car is anyway much, much cheaper than ownership.

Instead of your car sitting idle for 20 - 22 hours a day, let us help you make money off it.

Originally Posted by manjith_pm

Do you think it will be a fixed payout or on the basis of usage?

If it's on the basis of usage, there has to be a minimum guarantee, else it makes no sense. The risk is too high. I'm very sure there's a minimum guarantee.

Originally Posted by swiftnfurious

I don't think so. These vehicles will be abused to the core and we'll mostly have no choice but to sell it off after the lease period. Now, if the car has run a lot in such a short period, buyers will think thrice before even looking at the car and finally, this will go for a low re-sale price.

Hold your horses, cowboy! Lets wait for some numbers from Zoom. If what you are saying is true, no one would ever invest in a taxi.

Originally Posted by smartcat

Does it have to be a new car?

I'm guessing so, yes. New car = better reliability + driving experience.

Originally Posted by libranof1987

This might turn out to be a big mess in case you ever want to use the car back as a personal vehicle.

Though I don't think a BHPian would ever want to use a car that's been a taxi for 3 years, it's not that difficult to transfer it back to private registration.

Originally Posted by Rehaan

In a nutshell, this seems like ZoomCar is looking for a way to reduce their capital expenses, and is willing to share profits to make it happen.

. Also, any additional depreciation costs are probably not bringing a benefit to their tax structure. Related point: If you are an entrepreneur, you can get depreciation benefits on the vehicle you lease to them.

However, what real advantage does this have to the regular joe who wants to invest money? Why wouldn't he invest elsewhere?

The rate of return has to be better. Fixed deposits - a favourite of the masses - are too, too low.

Originally Posted by Nilesh5417

Now not sure if Zoom pays for upkeep of the car or you do. In which case you add that costs which means Zoom needs to pay you more than 32k/mth.

I have also emailed Zoomcar asking them to share some workable numbers. Will share once received.

[SmartCat]

If this "asset class" really picks up, we should come out with a JP Morgan/Citibank type report on which "investment" (car model) would be most profitable - based on supply and demand.

SUVs would obviously be an evergreen "sector". I expect models like XUV 500 and Scorpio to have the highest ROI.

[uday.ere]

Got a reply from Zoomcar, if we need additional details we can request them for additional documentation. One other point is one can pick up more than 1 car if one wants.

Quoting from the email :
"Car Models : At present, we're offering individuals with the option to invest in either a Maruti Ritz LDI or a Maruti Swift LDI. Zoomcar is able to get deals for the Ritz for ~5.1-5.2 lakh ex-showroom, while the Swift is ~5.7 lakh ex-showroom.

Upfront Process
- You can choose to either purchase the car with your own funds, or by using a car loan.

- Once the car purchase mode is finalized, Zoomcar and you enter into a 30-month Lease Agreement to detail the leasing arrangement between you and Zoomcar. You would be the owner and lessor while Zoomcar would the operator and lessee. Zoomcar and you will also enter into an agreement detailing the terms and conditions on which we will operate the cars on our platform.

- If you decide to take a car loan, Zoomcar will work with some of our preferred lenders (Cholamandalam Finance, IndusInd Bank, Mahindra Finance) to arrange a loan on your behalf. We are targeting the most investor friendly terms so a loan of ~90% of the purchase price, along with a 36-48 month tenor (these terms are subject to financier approval on an individual basis). The loan would be procured under your name and the equity downpayment (~10%) would be made by you.

- Zoomcar would help facilitate insurance on the vehicle so it's fit to run in our fleet. While Zoomcar would facilitate 100% of this transaction, the actual insurance cost would be borne by you (premium paid on an annual basis and the renewal is typically just 80% of the cost of the original premium). We work closely with United India Insurance and New India Assurance.

- Zoomcar would help facilitate insurance on the vehicle so it's fit to run in our fleet. While Zoomcar would facilitate 100% of this transaction, the actual insurance cost would be borne by you (premium paid on an annual basis and the renewal is typically just 80% of the cost of the original premium). We work closely with United India Insurance and New India Assurance.

- Zoomcar would help facilitate the registration, permit and tax payment for the vehicle; the car would be registered as a black board commercial vehicle under Zoomcar's name; RC would make mention of Zoomcar and you/the financier (if you avail of a car loan). The cost of registration and taxes would be borne by you while Zoomcar would handle all the on-ground work at the RTO so it's a hassle free experience.

- Once the above is done, we're ready to run the car on the Zoomcar Platform!

Ongoing Process
- Zoomcar will take a 30% cut of the revenue earned from the car each month for all the operational support provided by us.

- Zoomcar would manage 100% of the operations as the car would be based at our parking site and tended to by our staff to ensure the vehicle is suitable to serve bookings. This ensures a totally hassle free process for you.

- While 100% of on-ground operations would be handled by Zoomcar, we would charge to you the fuel cost, servicing/maintenance cost and GPS tracking cost incurred each month (all on actuals). EMI would also be borne by you since the loan is under your name.

- Revenue share provided to you on a monthly basis would be net of the operating costs mentioned in the prior bullet and EMI, if you have taken a loan for the car purchase and the lender requires Zoomcar to deposit this amount to them directly each month. Again, the idea is to simplify the payment logistics as much as possible on your side.

- Zoomcar will provide a monthly minimum guarantee payment of 3% of the vehicle ex-showroom price to ensure a baseline level of repayment. Of course, we fully expect your monthly revenue to be significantly higher under ZAP!

- At the end of the lease tenor, Zoomcar will return the car to you. This means that if you choose to sell the vehicle, you would pocket 100% of the resale value of the vehicle after the running period concludes (net of any loan amount remaining). Based on our experience, we expect resale value of ~40-45% of ex-showroom price on the car which would mean a significant cash inflow to you at the end of the lease. Zoomcar can help facilitate the vehicle sale if you desire to further reduce hassle for you."

[SmartCat]

Looks like the minimum guaranteed payment of 3% of vehicle ex-showroom price is designed to make the deal almost risk-free for partners.

Guaranteed minimum monthly payout works out to be Rs. 18,000 per month for Swift LDi (3% per month of ex-showroom price of Rs. 6 Lacs). Over 30 months, the minimum payout works out to be Rs. 5.4 Lacs.

If Rs. 18,000 is invested in fixed deposit earning 8%, you earn an extra Rs. 45,000 over 30 months.

TOTAL GUARANTEED PAYOUT: = Rs. 5.4 Lacs + Rs. 45,000 = Rs. 5.85 Lacs.


Your total costs:

Initial investment: Rs. 6 Lacs
No LTT since this will be Yellow Board car.
Resale value of the car after 30 months = 40% of Rs. 6 Lacs = Rs. 2.4 Lacs

Depreciation costs: Rs. 3.6 Lacs
Insurance: Rs. 60,000 (for 3 yrs)
Opportunity cost (loss of 8% interest on your Rs. 6 Lacs investment over 30 months) = Rs. 1.2 Lacs

TOTAL "GUARANTEED" FIXED COSTS: Rs. 5.4 Lacs

I'm ignoring maintenance & fuel costs because these are running costs. If the car is being run, you are being paid 70% of revenue earned by your car.

If your car is involved in an accident, it messes up the above calculations because payout from insurance company might not be equal to market value of the car.

[sivasain]

This is a very interesting deal. One question though. If the guy who rents the car has mini scrapes or accidents. Does the insurance cover it fully like zero dep ? And the user pays up to a limit for the damages, will it be used to offset any excess ? A couple of bumper or fender damages can do a good dent to the income calculations.