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An Update: How has COVID-19 affected Car Rental Services?

Jun 14,2020

Latest Updates

Here are some of the current car-industry news (as of June 5), that have occurred in the last month in Singapore, in continuation from our previous article on “Car Rental Services Admidst the COVID-19 Pandemic“. 

  1. 31 May 2020: Land Transport Authority (LTA) to resume Electronic Road Pricing (ERP) Rate reviews. From 6 April, ERP charging at all gantries were suspended, in line with the circuit breaker (CB) period. As Singapore enters into Phase 1 of Safe-Reopening post CB starting 2 June, LTA has announced that it will resume the ERP review processes by monitoring traffic speeds and congestion and decide how they would, moving forward, use ERP as a congestion management tool. 
  2. 22 May 2020: LTA announced the continued suspension of Certificate of Entitlement (COE) bidding as motor vehicle dealerships and showrooms have yet to be allowed to resume operations. Prospective buyers can continue to buy vehicles online via the use of Temporary COEs to register for new vehicles. TCOE that are expiring on or after 7 April 2020 would have an extension of validity of three months. 
  3. 22 May 2020: Car-pooling services are currently prohibited due to the current COVID-19 situation in Singapore. Due to CB, the demand for taxi and private hires which make up the point-to-point passenger transport (P2P) has also decreased. This demand may also not increase immediately back to pre-COVID levels even after CB has been lifted. 

 

For more information on the latest measures of LTA for COVID-19, visit here

 

How has Car Rental Services Been Affected? 

 

Motor vehicle sales have been badly affected, with an estimated 20.3% on year plunge in Singapore. This downward trend has also been observed all across the globe ever since the World Health Organization has announced COVID-19 as a pandemic on 11 March 2020. Of course, it is recognised that businesses from all sectors have seen its own fair share of challenges, but for the purpose of this article, the motor vehicle and car rental service industry would be in focus. 

 

Decreased Demand 

 

Firstly, consumers are observed to tighten their belts and reduce their spending as they await a bearish market outlook. As we approach a looming recession, consumers reign in their expenses and money would be spent on products or services that are absolutely necessary. In the case of transportation, consumers would rather choose more cost-efficient commutes like public transportation or the occasional private hires. 

 

Circuit Breaker

 

Secondly, a decrease in demand was  further aggravated by stay-home orders and as Singapore experienced the CB on 21 April 2020, which lasted for two months, till 2 June 2020. Economic and leisure activities during this period were hampered. Naturally, the demand for short term car rentals thus faced a toll during this time. Citizens were advised to stay home and to head out only if it is absolutely necessary. Employers were strongly encouraged to allow workers to telecommute as much as possible. This is on top of an onslaught of policy amendments like implementing staggered office hours and other safe distancing measures. Only essential services were allowed to continue to operate while abiding by various safety requirements. Hence, it is no-doubt car rental companies had seen a reduce in local demand over this period of time. 

 

Air-travel Restrictions 

 

Thirdly, car rental companies are also negatively affected due to the curtailment of air travel from governments all across the globe. As some car rental services obtain a bulk or a steady stream of their customer base through expat car rentals or travellers in airports, rental demand would inevitably be affected as citizens stay home. 

 

Upkeep of the Business 

 

The nature of the industry is one that requires high start-up capital. High inventory costs, maintenance, loan repayment and taxes being a few of the many considerations and costs that car rental companies have to juggle with in effort to streamline their operations to keep their business competitive and afloat. In light of this situation, the government has drawn from its reserves and has released an onslaught of financial assistance to offset some of the company’s overhead costs. Here is a link for a full view of the four budgets implemented. These monetary policies have cushioned the impact of the pandemic and have supported companies in staying afloat amidst these uncertain times. 

 

Beyond COVID-19

 

As Singapore graduates out of the Circuit Breaker into a Three-Phased Safe-Reopening Approach, car rental companies might experience a gradual increase in consumer demand as the nation adjusts to its new normal. Businesses across various industries are starting to pick up. Taxis and private hires are also allowed to make deliveries till end-September 2020. Electronic Road Pricing (ERP) as a congestion management tool would also continue to stay suspended, at least till June 28. 

 

However, the chances of retail demand for car rental services increasing to pre-COVID levels seem bleak, at least for the short term. It is hoped that in the long term, the demand for car rental services could gradually recover and that rental companies would prevail in this global pandemic and its socio-economic, psychological and political repercussions. Car rental and other companies related to the motor vehicle industry would thus have to constantly innovate and to streamline its processes to continue to provide short term car rental and long term car rental services for our customers. 

 

As we trudge through these unchartered and uncertain times, it is important to take heart that,  “this too, shall pass”. 

 

In solidarity and fortitude, we can emerge stronger as we embrace the new normal.