Car Rental is starting to emerge as a preferred alternative to car ownership. With the COVID situation in full effect one and a half years after its inception, and with Singapore being in the ‘Phase 2 heightened alert’ period, the request for access to on-demand products and services at low cost, little-fret and minimal commitment has become all the more the rage in recent months.
During these periods of uncertainty, retail stores have definitely been taking a beating, with sales of apparel and footwear, for example, crashing at 41.6% year on year. Cautious consumer spending, the lack of tourists and supply chain disruptions has caused businesses to rack their brains to find innovative ways to keep afloat.
Perhaps, during times of difficulty, comes opportunities and greater pushes for innovation, restructuring and revolution. Car rental companies are not spared. Despite these challenges, car rental services are riding on the wave of e-commerce and are starting to launch their services digitally, to reach greater audiences and to leverage on greater economies of scale.
HIGH PRICES FOR CAR OWNERSHIP
It is not uncommon to hear that car ownership is a luxury. Indeed it is. With Certificate of Entitlement (COE) prices soaring at an all-time high, with car prices and schemes like the Vehicle Emission Scheme (VES) experiencing a gradual but constant incline, it is no wonder how the attainability of car ownership in this day and age is increasingly difficult as car capital costs rise.
Of course, COE is only one aspect of the whole equation on the ultimate price of car ownership. Road tax, parking rates, maintenance costs, ERP, petrol costs and other miscellaneous costs add up, and over the years, the amount paid out of pocket in driving costs could rack up to a very substantial six digit figure!
As long as the price for car ownership and driving costs continue its steady climb, consumers would think that car renting and car sharing is a more viable option as compared to car ownership.
CHANGING CONSUMER BEHAVIOUR
As millennials become more financially savvy, more time and effort is placed into finding the most effective way to utilize their monnies. For the average spender, cars are seen as a ‘status symbol’, rather than an absolutely necessary tool for commuting. Car rental services provide an additional avenue to get from point A to point B, without the huge down payments, extensive research and mind-boggling paperwork.
The COVID-19 situation has highlighted the fears of uncertainty, where anything can happen anytime, and heightened the fear that an impending crisis could derail our financial capabilities even further. Rather than committing to a minimum 10-year COE contract if one were to buy a brand new car, this crisis has enhanced the demand for more flexible and mobile alternatives, with short term car rental and long term car rental (1 year and above) being available options.
LESS TRAVELLING NEEDS
It is also observed in recent months that travelling is not as prevalent as compared to its pre-covid hay days. This has led potential private car owners to reconsider the real necessity of buying a car, as opposed to other alternatives like car rental or car sharing. This is because most of the time, the car may be plunked in the car park instead of being efficiently used.
How have car rental companies taken a page out of other companies in the rental economy space?
The concept of a rental economy is not new. Other industries like tourism and hospitality, also utilize this business model to provide its customers with valued experiences with minimal commitment.
No doubt, and inevitably, the sharing economy was hit by the COVID-19 pandemic. As travel and commuting almost came to a screeching halt, with sporadic lockdowns happening all across the globe, many car rental companies had to make quick shifts in their business strategies to keep afloat.
Of course, other companies in the rental space took a huge beating too. Airbnb, for example, saw a 70% drop in bookings and had its valuation sliced in half. However, it has since survived the pandemic and created for itself an amazing turn-around, as it heads towards IPO, with an expected valuation of $35 billion. It is no doubt that its remarkable recovery story is an inspiration to many companies in the rental and sharing economy.
Taking cue from the amazing success story shown by Airbnb, creative minds came to work and revitalized their business model to keep the company afloat during trying times. Hence, many car rental businesses have adopted creative ways to enable the company to stay afloat. Trying times have provided them with the added push they need to streamline their business operations, lower administrative costs and make it more advantageous for both business and consumers alike to engage in various kinds of transactions (i.e. short term car rental, long term car rental).
THE BENEFITS OF DIGITALIZATION
With digitalization, communication needs, resources and logistics allocation can be better redirected to manage business operations more effectively. This allows rented cars to be easily available to the masses, thereby increasing the demand of cheaper and more temporary options as compared to its counterparts of car ownerships. With digitalization, it aids the rental economy and allows it to benefit in its economies of scale by reaching greater audiences.