Car rental market accelerates

Only in the last 10 years has the rental sector for cars started to reach heights seen elsewhere, with the arrival of major international firms, Photo: Le Toan

Despite Tet holiday being over a month away, a young Ho Chi Minh City couple living with a three-year-old child are trying to find places to rent a car to return home to the southern province of Dong Nai during the Lunar New Year.

“Car rental costs have doubled in the run-up to Tet, and are harder to find due to lack of cars. For us, it remains the preferred mode of transport for certain routes, where air and rail travel are not available,” the husband said.

The car rental demand has been increasing fast in recent years across Vietnam, from budget to luxury cars, and not only for Tet holiday. The sector is expected to heat up with the recent announcement that the world’s largest car rental provider, Enterprise Holdings, is to enter Vietnam, making the country the first stop for the Enterprise Rent-A-Car brand in Asia. There are already 85 such locations in Europe and the Americas.

The announcement followed the appointment of MP Logistics as Enterprise Holdings’ franchise partner last year and is part of the group’s goal to expand access to its car rental services throughout Asia and the Pacific.

Under its plan, Enterprise Holdings will operate from Ho Chi Minh City. The strategy for the first year will be to grow a base of corporate customers by focusing on MP Logistics’ current clients and employees of multinational companies with operations in Vietnam. The initial emphasis will be on long-term rentals with a chauffeur.

POTENTIAL OUTLOOK FOR CAR RENTAL MARKET

The latest study from Ken Research, titled Vietnam Car Rental Market Outlook to 2021, suggested that the sector in Vietnam provides huge potential for investors to utilise technology in car rentals. Increasing traffic, lack of parking spaces, convenience, rising tourism, and promotions and discounts to attract customers will be the key drivers for the growth of the car rental industry in the country.

The currently-fragmented market currently features various organised and unorganised players operating including Vina, Avis, Vinasun, and Mai Linh among others. The car rental market was dominated by domestic companies until the entry of internationals, starting with Budget in 2008. From then, rental giants including Hertz and Avis also entered the Vietnamese sector and are competing with local companies including Vinasun and Mai Linh.

Cuong Dang, deputy chairman of MP Logistics, said that there is great demand in the market but inadequate supply, but it will thrive in the future. Reasons include Vietnam’s growth of foreign direct investment, and the increase of the middle class.

Dang explained that growth in businesses will further increase demand, and that the younger generation does not accord much priority to luxurious cars and big homes, tending to pay more attention to quality of life and experiences. As such, they would be more willing to rent cars.

“This is a major next step in enabling us to provide the best service to our customers at home and from overseas,” said Dang. “It is these shared values that will enable us to succeed as we expand our joint business across Southeast Asia.”

Nguyen Minh Tri, owner of nearly 15 cars for rent in Hanoi, said that the arrival of Enterprise Rent-A-Car will create bigger competition in the Vietnamese rental sector, especially for companies and expatriates. “The market still has much room for small- and medium-sized companies like us to make profit,” he said.

In a press release last year, a representative of Discover the World, a general sale agent for Hertz, said that, “With Vietnam’s booming economy and Vietnamese citizens being granted access to international driving permits since 2015, the partnership comes at just the right time.

“The team’s extensive experience in the travel industry and strong relationships with local networks will enable a fast distribution of Hertz’s services across all available channels,” he added.

Since 2014 it has been easier for inbound tourists and expatriates to drive legally in the country. This will continue to be a factor contributing to the performance of car rentals in the next few years.

Alongside that, the tourism industry is on the rise in Vietnam which has made a positive impact on car rentals. Trends that have led to the increase include the rise in Chinese and South Korean visitors, accounting for 48 per cent and 34 per cent year-on-year growth respectively.

In addition, the 15-day visa-free policy for citizens from France, Germany, the UK, Spain, Italy, and Belarus has increased investment in air travel infrastructure. Tourists prefer to use car rental services for travelling to popular destinations and also purchase these services in travelling to and from airports.

TECH AND PROMOTION PROGRAMMES DRIVING SECTOR

Car rental companies are predicted to utilise eco-friendly technology by introducing electric cars. Firms are expected to launch mobile apps to compete with cab aggregators like Grab, which entered with a different business model connecting freelance drivers with potential customers. Thus, car rentals can compete on price, discount and promotions. The Ken Research report said that different offers are aimed to both attract new sales and retain loyal customers. The customer base has been growing due to internet penetration and an increase in smartphones with high convenience. Various car rentals such as Vinasun, Hertz, and Avis are also shifting to mobile apps to increase convenience.

According to Avis, the Avis Now feature on its mobile app allows customers to control more details of their rental experience from their smartphone, including confirmation, cancellations, or extensions of a rental. It also assists with locking and unlocking doors, or flashing the headlights to help find their car.

“Our customers are not shy about telling us what they think can be better in car rentals,” said Scott Deaver, Avis Budget Group’s executive vice president and chief marketing officer. “Avis Now was designed to seize those opportunities – with technology that gives customers what they want today and anticipates their future needs as more connected vehicles hit the road.”