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Seeking Advice for Scaling Up a Two-Wheeler Rental Company!

Hi there!

I’m solving a problem of independent transportation in cities by being first long term 2-wheeler rental company. Writing here to seek some scaling up advice.

In my three years of college life one major problem I came across was affordable, independent transportation. Two months back I began Ontrack Technologies with the aim of solving this one problem.

We started renting bikes at a nominal price and enjoyed a successful B2C relationship. But now would like to focus on a B2B model which has constant revenues and less operational costs. We now have a few confirmed orders from businesses who are willing to lease our bikes for 2-3 years.

Now the problem with these orders are that I’ll require huge capital to purchase the bikes. We tried speaking to banks, but they seek collateral and vintage (and we don’t have either). Most of the VCs/Investors aren’t interested in this model at present due to its capital intensive nature and the scalability is questionable.
Few of them told me that this is much needed solution, but a very difficult business model.

I see this as a big opportunity for us as we are the only ones leasing bikes in the country as of now. Yes, the bigger the opportunity gets, the more challenging it becomes. But this I see this as a serious business that serves a purpose and on that can make money.

I would love to hear your advice about our business model and on how to scale up at this stage.

Regards

Harshit Sonthalia

@sonthalia0

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31 Comments

  1. Have you tried finance companies like Hero Fin Corp or Bajaj Finance? Because you have orders, it shouldn’t be very tough to get the bikes on finance and pay the monthly installments. Maybe you can cut the deal for a higher interest rate to make the deal more attractive to them.

  2. hey harshit,

    where are you based and where do you want to start this up initially?

    you don’t have a site right now i believe or an app. so how do you operate?

    ps: bike rental is a huge biz in goa!!! 

    we have another rodinhooder into something similar – will share the link with you after the newsletter goes out!

  3. Greeting Chetan!

    Yes. I tried several finance companies including Hero Corp and Bajaj and they all require Vintage/Experience. My company is just 2 months old. I would love to take finance but unfortunately my company is too young to eligible for me.

    Thanks!

    Regards

    Harshit

  4. Greetings Asha!

    We are currently based in Bangalore and have received confirmed orders from few businesses here itself.

    We don’t have a website as of now. All our customers are students from my college and contact me via call to rent the bikes.

    Yes, Bike rentals is a huge business in Goa as well. And we would love to lease our bikes to already existing rental companies. This will help them to acquire the bikes without incurring huge capital expenditure.

    Would be happy to connect!

  5. We are working on same thing in different product in Mumbai. Do write me at vishal.neema@yoptions.in

  6. Hi Harshit

    I did a pilot in Mumbai last year, see bikeseeker.com , did you get the commercial license for the bikes ?

  7. hey harshit – i was referring to zeeshan’s venture! pls chk!!

    http://therodinhoods.com/forum/topics/lyft-with-a-twist-2-wheeler-taxis

  8. Hey Harshit,

    Your Audience would be available in the Riders Clubs, Adventure Clubs, Tours and Travels (Bike Travelers), Contract Hires, Fleet Management companies like they do for the 4 wheelers, and also now Ola Uber are coming up with 2 wheeler taxis too and also if you can target the Delivery Guys from Major Food Delivery systems like McDonalds, Dominoes, PizzaHut and other locals as well, in the various cities they have a presence with you catering too there similarly. (we also have one Rh Amit from Delhi who is looking to Get Delivery vehicles sourced out for his Venture “The Pasta Kitchen”

    Check these out if it helps to understand better or connect as well in similar lines ( we are the only ones leasing bikes in the country as of now) Rentals/ Leasing etc

    http://www.indiabikes.com/autorentN1/firstformln.jsp

    http://www.royalindiabikes.com/

    http://www.stoneheadbikes.com/our_services.html

    http://www.wheelstreet.in/ (Bangalore too)

    https://www.wickedride.com/

    http://www.dvkbiking.com/

    If you can show the Finance companies the Lease contracts you can secure Loans on the Bikes to be purchased and leased. (Company formation would be Primary though, with necessary documentation etc)

    Cheers!!!

  9. Greetings Vishal!

    Pleasure connecting. Will send an email soon.

    Regards

  10. Greetings Zeeshan!

    Pleasure connecting. And no, we are working on the rental license. Meanwhile we are focusing on B2B Leasing which doesn’t require the license. It secures our revenue and operational overheads are comparatively less.

    Once we have the license we’ll enter the B2C market to provide affordable, independent transport.

    Regards

    Harshit

  11. Hi Asha!

    Thank you for all the assistance!

    Regards

  12. Greetings Darshan!

    Thank you for all the information.

    Yes, We are targeting such companies only. In-fact we have secured few purchase orders from few bike rentals here in Bangalore including a major interest shown by wicked ride.

    Wheel street is an aggregator platform, but can be really helpful in terms of sharing the data of Bike Rentals across the town.

    Ola and Uber has tried its hand in Bike Taxis while few pilot companies like Rapido are still working even after regulators have raised issues. We surely see them as potential customers. Again, Bike-taxis are legal in Gurgaon and M-Taxi (Bike Taxi Aggregator) are showed interested in this model.

    We have also targeted logistic companies including Flipkart – who says that from a need perspective there is a huge demand. 

    However, with all the market there is. I’m currently struggling to manage funds for the same. Finance Companies won’t be able to help at this stage because the age of the company is only 2 months and we don’t have any collaterals to give.

    But, thank you for sharing a list of potential customers. Its a big help.

    Warm Regards

    Harshit

  13. Hello Harshit,

    Yes wanted to add Logistic companies as well in my earlier reply but could not due to timeout, good you are looking into it AS well. Had a few more other Such companies too can share with you again privately, if required and if it helps.

    This is a CAPITAL Intensive Product Based Service.

    (Akin to something like setting up a Cyber Cafe with Computers as one time investment and then using them per hour or per print etc as provided services at the Site)

    There are two ways you can go about doing this 

    1> Invest Your own Capital and Buy First Hand Bikes (Or get it on loan, and pay as EMI)

    2> Reduce costs on Initial Capital and buy Auctioned Bikes or Second hand bikes (Need again a Solid Investor or Bank or OD facility etc)

    If CAPITAL Arrangement is your initial hurdle… Suggest you think this over one more time and first try to get a company registered and get some POV on the friends and family before you look towards expansion and order securing, the ways this is to be done would be limited only on your own network resources and geographical location with the same available as a proof of concept for other location Pan India later for expansion, a JV or tie up with Bike manufacturers or existing Service providers could be a way ahead for you to start adding your own small fleet to theirs, secondly make it as a SAAS using the website or also as an APP on mobiles (various OS based) 

    You can check with few of the Bike dealers in your area and check with them for Bulk /volume purchase on dealer rates from the manufacturers with this concept so you can offload the bikes and start the income and pay in parts /EMI as a way to keep it going, since there would hardly be a brand loyalty on rentals or leasing mix and match for multiple brands or same brand different models should work, you can look for low maintenance, higher service time for yourself and Higher Mileage per liter as basic factors.

    Since you have an Tourism background you can connect with a few of your older network connections and try to add ATB’s (all terrain Bikes or Quads)to this format too which are good for leasing / renting in the Beaches/dunes etc too. (know someone who does only ATBS rentals pan India)

    This would be an Uphill task otherwise if you do not have the Business Plan ready with Costs estimates and break even and the CAPITAL arrangement sorted out for small, medium and long term milestones/goals to be achieved and scale thereafter too. Since maintenance and fuel costs would also be other investments as well as Mechanics and Riders in house (salaries) with a Warehouse or Garage as a minimum for your Stock of spares and Bikes (security being another addon).

    Would be glad to talk it over the phone for any more discussion in this regards,if you want since I am in Mumbai and you are in Bangalore. (Pmed you on FB)

    Good Luck!

    Cheers!!! 

  14. Greetings Darshan!

    Yes, we are a heavy capital intensive product based service exactly like a Cyber Cafe.

    And we are company, incorporated in Feb 2016. I forgot mention that before.

    Now with regards to investment from Banks and NBFCs, we have all the required documents except the Vintage (Experience/Age of the Company) or any collaterals to give.

    We cannot purchase second hand bikes as the order we have received is for brand new vehicles. The only way cost reduction is possible here is by bulk discounts from manufactures and their dealers which we are already in talks of. Credit from their end is difficult at the moment as its our first bulk order. Access to their credit is easier once we complete a few orders with them.

    With regards to Mobile Application and Website, we see this need in B2C market where the consumers need a platform to contact the company. Right now, our focus is on B2B where Mobile Application does’t add value. Although, a website is on its way and will be up soon.

    Yes, all terrain bikes and Quads have good potential for rentals and leasing but, thats a market for the future. We’ll definitely keep this suggestion in mind when we enter the tourism space.

    Initially the investment is high, but with B2B – and the Businesses/customers being other bike rental companies we do not have to incur the operational expenditure to the described extent. Yes, there will be a lot of money needed to promote B2C, but like I said. We want to secure our revenues and profits first and hence B2B.

    Once again, thank you for all the help. I’m looking forward to discuss more on this with you personally.

    Regards

    Harshit

  15. How do accidents and unfortunate incidents work in this case?

    I am given to understand that the Police first arrest the owner of the bike (which is you) even though you may have rented it?

    Also, have you approached the Bike Manufacturers themselves for soft sales terms/ finance?

    Can you explain the gross margin of this business?

  16. Greetings!

    Accidents and unfortunate incidents are covered with Comprehensive Insurance which is a basic requirement for any Bike Rental Company under the Rent a Motorcycle Scheme, 1997. Hence, the liability of the owner (which is the company) is nil. With regards to the damage, these vehicles come with zero debt/comprehensive insurance in most cases where-in the driver of the vehicle has to pay a maximum liability around Rs 3000 to Rs 5000. With regards to life, these insurance covers upto Rs 1,00,000 for the driver of the vehicle and upto Rs 7,50,000 for damages caused due to our vehicle. 

    No, I haven’t approached any of the Bike Manufactures as of now considering that my demand is low. But we consider this option as we grow.

    Now talking about the gross margin. With B2B we see it as 0.4%.

    Say, a bike costing us INR 60,000 is leased for 36 months to a company for INR 2,500/month. By the end of 3rd year a revenue of INR 90,000 is generated and we still own the asset. The sale of asset may require some cost hence I have assumed that the bike will sell for INR 10,000.

    Regards

    Harshit

     

    • Had to check all the replies before posting.

      I don’t know about Bangalore, but here in Bengal there is MSME Facilitation centre (dept of industries). I had gone there for somebody else’s business (a manufacturing concern) and they said that central government provides 40% subsidy for small scale (below 25lakh) + 7.5% subsidy on interest (for loans taken for whole business). You could see if that would be provided for a service industry.

      Another option is getting the initial capital from people, lots of them. For 20 bikes it’d be Rs. 3 lakh (15K per bike), which you may very well get if you asked family/friends/acquaintances/moneyed guys. That’s just 6 people giving you 50k.

      A query for you, when you had applied for license for Rent a motocycle scheme, did you own a bike or you just listed that you’ll buy them later?

  17. Ummm,..that’s not really gross margin as you havent factored in interest costs of 60k for 3 years.

    Can you share your contact details or give me a call at +91 9999 334 995 when you have some time.

    Thanks.

  18. Greetings Abhik!

    My knowledge on the Subject of Gross Margin tells that Interest isn’t a factor which is included here. It would come if I was to find Net Margin.

    Now, about the other costs. There is absolutely none once these bikes are leased out. Our company won’t be bearing the cost of repairs and maintenance with regards to the orders we have raised currently.

    Considering Interest as a Factor here, assuming that its at 15% per annum.

    The Net Margin if the the principle is paid at the end would be 0.13 or 13%

    In case the amount is paid through EMI, then the Net Margin would be 0.25 or 25%

    Tax would occur if the number of bikes increases.

    Regards

    Harshit

  19. Hi Harshit,

    I may not know if some one has already pointed this out to you. For the sake of repetition : Would you like to contact people in your area of operation who already own bikes and don’t use them now? Or you can find people who want to sell their bikes?   Or a neighborhood bike garage? There are people around who want good returns on their investments (Fixed Deposits, Mutual Funds, Equity Markets) – Add Bike on Rent you may find some…!!

    GOOD Luck!!

  20. Greetings Vinod!

    We haven’t contact individuals with regards to purchase of second hand 2-wheelers. Currently we purchase our bikes from Credr (Aggregator for Second Hand 2-Wheelers). They offer us warranty and Road Side Assistance which we require. The problem with purchasing bikes from individuals is that there is no warranty/guaranty for the bikes.

    Plus, we soon plan to move over second hand 2-wheelers as the cost of maintenance around it is heavy. Also, the orders we have received from other businesses to lease bikes are for new 2-wheelers.

    Tomorrow, if law permits we would love to create a platform where anyone can rent their bikes and earn decent revenue out of a dead asset. But as of now, there is not much that I can offer or take from in this area.

    Thanks

    Regards

    Harshit

  21. Hi Harshit,

    Please share your contact details, Will connect during the week,

    Thanks!

  22. Some thoughts: Hope it helps

    1. Convince your potential and targeted clients to pay you upfront and maybe you could give them further discount for the same. Hard cash in Bank is the first option. A long term contract is 2nd best option.

    2. If the above works, i am sure your bank manager might help you get working capital loan on the basis on contract or money in the bank. (if you need it)

    3. If the (1) works, maybe connect with SIBDI under Startup Funding Initiative via your Bank

    4. If the (1) works, you may want to again goto VCs with big cheques.

  23. You may also want to contact Deepak.Gupta at equitycrest.com i am sure you will find right investors. BTW refer my name to get faster response!! All the best

  24. Also, you may want to consider contacting https://www.linkedin.com/in/nimishjoshi

  25. Greetings Chandrasekar!

    Pleasure connecting. Here are my contact details:

    Email : harshit@on-track.in

    Phone: 9739250121

    Regards

    Harshit

  26. Greetings Bhuvan!

    Yes, we are working on a model which is allowing them to own/use bikes for any purpose at the best rates possible. With regards to paying an upfront, I believe we can present this offer to them. Right now, we have’t sourced any capital for the order and thus it puts us at huge risk for taking any advance. But to secure our regular payments we’ll receive Post Dated Cheques from them.

    We are in contacts with several banks and NBFCs with regards to this but no positive signs are seen yet.

    I’ll take a look into the potentials you presented with SIBDI.

    Raising capital is my concern too, we are looking to roll over 200 two-wheelers, only when I have those many bikes running will more investors take interest in this model.

    Challenge here is finding that initial investor, someone who believes this is doable and is ready to put in money.

    Regards

    Harshit

  27. Thanks for the contact!

    I’ll connect with him.

    Regards

    Harshit

  28. Hello Harshit,

    Please share your contact details, we would be interested in taking 10-20 bikes from you on rent in Bangalore.

    Regards

  29. Greetings Amar!

    Pleasure connecting. Here is my contact details:

    E-Mail : harshit@on-track.in

    Phone : 9739250121

  30. We are working on same platform Its Delhi Based Bike rental you can check: http://www.backpackclan.com

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