Competition getting fiercer as demand continues to increase

Competition getting fiercer as demand continues to increase

T. Sima Gunawan, Contributor, Jakarta

Vehicles are crucial in the business world, but it does not
necessarily mean that every company must own its vehicles. This
is thanks to the many vehicle rental companies offering their
services to potential customers.

A lot of companies prefer to rent vehicles instead of
purchasing them. This is due to a number of reasons. Renting
vehicles allows them to manage their cash flow in a better way
and it saves them from the problems connected with vehicle taxes
and maintenance. In other words, it helps them to work more
efficiently, which is a must in the current competitive business
climate.

Since the economic crisis hit the country in the 1997, a lot
of companies have had to work harder and dream up new strategies
to survive. Outsourcing has since then become a trend and the
this is true not only in the human resources field, but also in
the facilities field. Which might explain why the past few years
have seen a growing number of vehicle rental firms, according to
Edi Gunawan, marketing manager of Astra Rent A Car (TRAC) .

TRAC, one of the major vehicle rental firms in the country,
was established in 1986 and now has offices in 12 big cities
around the country. It has some 9,000 vehicles -- 60 percent of
them are Kijangs, and the rest various makes of passenger
vehicle. It plans to increase the size of its fleet to 10,000
next year.

With between 85 percent and 90 percent of its customers being
corporations, TRAC has been growing rapidly.

"We have managed to educate the market so that they prefer to
rent vehicles instead of purchasing them," said Edi, who believes
that "the only sign of life is growth".

Along with the increasing tendency to rent vehicles, the past
few years have seen a sharp increase in the number of vehicle
rental firms, which cater mostly to the needs of corporate
clients. Most of them rent passenger cars, but there are also a
few, such as Hartono Rent Car and Europcar Indorent, that also
rent commercial vehicles such as pickups, buses and trucks.

The rental period varies, depending on the contract. A client
may rent a vehicle for a few years, a few months, a month, a week
or even just for one day. Smaller rental firms even offer
vehicles on an hourly basis. Drivers are usually available on
request.

"On average, our clients rent the vehicles for three years,"
Edi said, adding that many of its big clients rented more than
200 vehicles each.

Companies that used to consider vehicles as secondary needs,
Edi said, had now changed their minds and regarded them as
primary needs, especially in Jakarta, where public transportation
is still a major problem.

Attracted by the opportunities in the vehicle rental business,
the Association of Indonesian Batik Cooperatives (GKBI)
established a vehicle rental division, GKBI Motor, in 1993. It
currently has 200 vehicles, but also rents out another 300
vehicles owned by individuals who allow the company to manage
their vehicles.

For brand new vehicles, the minimum rental period is two
years, said Iwan Mulya Setiawan, head of the vehicle rental
division.

He said, GKBI Motor offers lower rental rates, works hard to
maintain customer trust and employs a personal approach to
satisfying its clients, which include several foreign embassies
in Jakarta.

The rental fee for a Kijang made in 2000, for example, is
between Rp 4 million and Rp 5 million a month, while the monthly
rental fee for a new Mercedes Benz can be up to Rp 40 million.

Avis, a world-renowned vehicle rental firm, opened an office
here in 1973. Today it operates in Jakarta and in Bali, while its
offices in Surabaya and Bandung have been temporarily closed due
to low demand.

In Jakarta, 80 percent of its clients rent vehicles for
business purposes, but in Bali all of its customers are tourists.

"Our business depends greatly on the economic situation and
the news about Indonesia abroad," said Harry Jauw, the marketing
and service manager of Avis Indonesia.

Even though it is relatively small -- Avis only has some 200
vehicles -- Harry does not really worry much about competition as
Avis has its own market.

"We receive many reservations from overseas," he said.

Avis has offices in more than 100 countries around the world
and it cooperates with 70 airline companies, Harry added.

Another vehicle rental company that has existed for quite a
long time is Golden Bird Metro & Pusaka Prima, which is a part of
the Blue Bird Group.

It has a total of 1,400 sedans and vans available to serve
both corporate and individual clients. "The types of vehicle that
are in high demand are mid-range sedans of between 2000 CC and
2,500 CC," said Teguh Wijayanto, the firm's public relations
officer.

He noted that the number of vehicle rental companies had
increased rapidly over the past few years -- faster than the
growth in customer demand.

"While there might be hundreds of registered vehicle rental
companies, there are possibly thousands of individuals who are
also in the business," he said.

Amid the tight competition, each vehicle rental company has
its own strategy for winning market share. But they all agree on
one thing: good service is a must.

Besides going through a vehicle rental firm, a company can
also rent a vehicle through a leasing firm. Many leasing
companies also provide rented vehicles to corporate clients, in
addition to providing financing for the purchase of vehicles.

Its operating lease service, PT Orix Indonesia Finance -- a
joint venture between Japanese leasing firm ORIX Corporation, the
Bank Indonesia employees foundation (Yayasan Kesejahteraan
Karyawan Bank Indonesia) and PT Bina Usaha Indonesia --- also
provides a vehicle rental service.

When you need a new vehicle, for example, ORIF will provide
you with either a new Japanese, European or American model, with
all the options you want and the color you prefer.

All the maintenance (breakdown and regular maintenance),
insurance, towing, vehicle document (STNK) renewal and the supply
of a replacement vehicle are taken care of by the company.

When the contract ends, you can continue to use the vehicle by
renewing the contract or just return the vehicle to ORIF.