On the Growth of Indonesian Car Rental Businesses & Tips for Those Who Want To Get Started

When talking about the Indonesian car rental industry, it is crucial to reference the history of transportation itself as well. Early development first occurred within all major European countries, and during the year of 1912, a German company was able to provide three cars for rent during a time when automobiles were considered a luxury item and could not be owned by the majority of the population.

Five years later, an entrepreneur from Omaha, Nebraska named Joe Saunders started a vehicle rental service by leasing a T Ford, and subsequently a year later, through his company “Ford Livery”, the business was able to expand to the point where they were able to rent out 18 car models.

Indeed, the car rental industry has been growing rapidly after World War 2 due to the fact that people tended to travel long distances, which inevitably would be a lucrative factor for the industry as a whole. After this, several car companies had emerged, most notably Europcar, Enterprise Rent-A-Car, and Thrifty Rent A Car.

So how did the car rental industry develop in Indonesia? Indeed, car rental businesses have experienced rapid growth since the last ten years. Within this current digitally based economy, a wide variety of rental companies are starting to apply what is called the “pick up the ball” strategy through the use of digital marketing campaigns. Once conventional car rental services are now beginning to develop digital literacy at a rapid pace, being further equipped with digital assets such as websites , social media and online rental systems which make it much easier for their customers to conduct business

Read also:  6 Best Tips On How To Find The Most Reputable Car Rental In Jakarta

The consequence of the pandemi

Unfortunately, the car rental industry, as a whole, has declined within recent years due to a pandemic which has since become ubiquitous. Many of the players within the industry have closed down due to a drastic drop in demand, one of which is the regulation of Large-Scale Social Restrictions (PSBB). The impact is not only felt in small cities, as major metropolitan areas have also been affected.

One such business that has been affected hails from Surabaya. The East Java Regional Car Rental Entrepreneurs Association has mentioned that during the beginning of the emergence of the pandemic, there were only 5% of customers who had still used car rental services.

However, in accordance with the improving conditions of the pandemic, the Indonesian car rental industry has been starting to recover. Since Lebaran, momentum has been gaining and the government is not beginning to allow people more free reign in their travels, thereby increasing the success of the car rental business. In addition, the tourism sector is starting to reopen, resulting in exclusive car or bus rental services being sought for those who want to go on vacation.

Why Are Car Rental Services In Demand?

The car rental business in Indonesia has proven to be able to survive in the midst of existing problems. From small towns to big cities, you can find car rental services that will inevitably increase in demand before the holiday season and Eid.

Then, why do car rental services in big cities, such as Jakarta, Bandung, Surabaya, Makassar, and other cities continue to survive with increasingly growing demand?

1. Renting a car is a practical option

Consumers view renting a car as a very practical option because they don't need to spend money on car maintenance, replace spare parts, pay insurance policies, and even pay any tax. Not only from the customer’s point of view is this true, but also companies that need operational vehicles indeed view such services as extremely helpful due to the fact that they only need to make reservations in order to utilise any brand new vehicle that is required.

2. Can be adjusted to the targeted destination

The majority of car rental businesses are located within big cities that are tourist attractions, making it easier for travellers to mobilise during the holidays. Moreover, car rental services develop their businesses through providing tour packages to visit certain locations. Those who need to go on a business trip can also have their schedules adjusted to their destination.

3. Flexible in terms of time

If you are using a rental car only for a couple of reasons, then renting is certainly the right choice, as you can adjust the services to your specific requirements. The choices vary, ranging from daily, weekly, monthly or yearly car rentals.

4. Passenger capacity can also be adjusted

Many ultimately prefer to use car rental services solely as a means of supporting transportation, which applies even to those who already have a car. Apart from considering the distance and the destination itself, another reason is passenger capacity. If you are going on a family trip or picking up company guests, it is usually the case that you will need a bigger car. For this reason, car rental services provide a large selection of car types, ranging from hatchbacks, MPVs, sedans, commercial vans, to buses.

5. Renting a car for one’s own reputation

Car rental service users sometimes require luxury cars for their own lifestyle or business purposes. The company's image will "go up" if employees use such luxury cars; the solution to this being the car rental industry, which provides such amenities.

6. For companies, renting a car can reduce their costs

The business sector needs to be careful when preparing financial budgets after the COVID-19 pandemic becomes endemic, so that operational activities can continue to run and businesses can benefit. One of the company's budgets that can be reduced is in regards to operational vehicles so that they can be used for other posts. Compared to buying operational vehicles in large quantities, it can prove to be more efficient if the company rents a car, especially since the prices for renting a car in Jakarta and other big cities are increasingly competitive.

Read Also: 6 Car Rental Corporation Terms for Company Inventory

Car Rental Businesses: Tips & Benefits

Car rental business can be considered quite a promising industry, especially if you live in a tourist location. Starting this business also does not require the entrepreneur to be in possession of many cars. After the business has grown and demand rises, you can further add car units. How does one start this enterprise?

Plan your business in advance

Both the car rental business and other businesses, of course, require careful planning. To get started, it's a good idea to look for answers to the following questions:

a.      Who is your business target?

b.      Who are your competitors and what are their business schemes?

c.      How many cars will you use to start this business?

d.      Where will the business location and car storage area be?

e.      What is the approval process for a car rental business?

f.       How will you find your renters?

g.      How much capital does your car rental business require?

Choose a strategic location

A strategic location makes it easy for you to jump start your business. Choose a location that is usually crowded with tourists, on the side of the road, near offices, and within an easy-to-reach location so that it is not difficult for tenants to visit your car rental location.

Take advantage of any existing cars

To be able to meet consumer requirements for car rental services, car rentals should be able to provide many selections & car models. However, that does not mean you can’t start with only a small amount of capital. If you have an unused car, rent a car at a rate that can be adjusted based on hours of use, for example IDR 250,000 for 6 hours or IDR 400,000 for 12 hours.

Choose a car that is in high demand

However, if you have large enough capital to start this car rental business and plan to buy a new one, it's a good idea to choose a car that is in great demand. A car that possesses a large passenger capacity, is fuel efficient, and is easy to maintain will facilitate your business overall. Cars such as the Avanza and Xenia are among the most sought after cars considering their capacity is up to 6-7 seats, making them suitable for family trips.

Avoid buying used cars even though they are much cheaper. A new car will reduce maintenance costs. By choosing a new car, your business will possess more value for your customers because it is convenient to use.

Read Also: 10 Best Fuel Saving Tips for Daily Driving

Set clear terms & conditions

A very important point in starting a car rental business is taking care of any required permits and documents. Considering that this type of business is considered high risk, such as the possibility of your cars being towed away, it is better to set clear regulations and terms & conditions when setting up your business, for example:

-        Utilise an agreement letter signed with a stamp duty.

-        Enforce the detention of KTP or other identity cards from customers.

-        Fill out a form for customers so that they can input any personal data.

-        Install a GPS tracking device on your car.

-        Take photos of the car's condition before renting.

-        Register the car with an insurance company.

Another risk of this business is that cars can be damaged in an accident, and even lost. For this reason, it is important to insure your vehicle assets so as to not interfere with the smooth running of your business. Currently, many insurance companies cooperate with small-capital business entities.

Read also: How to Choose the Right Car Insurance for Businesses that Match Your Needs

Engage in digital promotion

Carrying out conventional promotions, such as through word of mouth or flyers, is not a very effective method in reaching potential customers these days, especially if the business in question is for car rental tours where the prospective customer is located far away. The online marketing strategy will help you to expand the visibility and reach of one’s business, thereby attracting more customers and increasing credibility overall.

Build relationships

To be able to gain the trust of any potential customers and even investors so that your business can further grow, don't forget to build relationships and networks throughout the industry. You can join several communities and car rental business associations within your area and take part in the activities provided by them. That way you can stay up to date.

Profit projection for Car rental businesses

In order to find out how the industry can benefit you, it's good to conduct a simulation first.

a. Monthly income

Simulation:

-        Car rental costs include driver and accommodation.

-        Gas, toll fees, parking, and other costs that are incurred by the passenger.

The cost of renting a car in one day: IDR 500,000.

Total income per car in one month: IDR 15,000,000.

b.     Profit

Monthly income simulation: IDR 15,000,000

Operational costs:

-        Monthly routine service: IDR 1,000,000

-        Car instalments (if still in instalments): IDR 5,000,000

-        Other fees: IDR 500,000

Total income - monthly operations: IDR 15,000,000 - IDR 6,500,000 = IDR 8,500,000

The simulation presented above is a calculation for one car only. However, don't forget to prepare a budget for your vehicle's annual tax costs.

Well, this has been a comprehensive review on the development of Indonesian car rental business. For those of you who are in need of rental services within the Jakarta area and within other big cities, trust the services provided by MPM Rent, which aims to provide various transportation solutions. For more information visit MPM Rent.