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.