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The UAE Car Rental and Leasing Market is expected to be driven by Changing Customer Preference vis-à-vis Personal ownership owing to Covid-19 coupled with Rising Tourism, High Vaccination Rates enabling Commercial Activities: Ken Research
The demand for rental and leased cars increased after the lockdown imposed due to Covid-19 pandemic was lifted but restrictions imposed by the UAE government on Public transport continued. There was a shift in consumer preference due to various factors. Most noticeably, health concerns by individuals and families moved to rent cars instead of using public transport. The growth of tech aggregators in the market also eased the process of selecting vehicles on rent or lease. Nonetheless, the behavior of individuals and corporates varied as individuals demanded cars for a shorter period of time more frequently than compared to corporates who demanded vehicles for a longer period of time.
: Companies in this space are bullish towards Expo 2020 with the event spanning for a period of over 6 months and with an expected arrival of over 3 million people for the event. In the Limousine space, companies are bullish towards the event due to the increased pre-bookings done by corporates for the event. Furthermore, there is an expectation in the market that tourism will revive back due to the high vaccination rates and the attitude of the government towards this has been seen fairly positive.
The Government in UAE has been pushing towards a movement towards electric vehicles in a strong manner by providing both monetary and non-monetary incentives. The most direct of this effect would be experienced by the taxi and limousine companies working in the industry as the government owned companies have already started transforming their fleets to either hybrid or electric ones, providing them with a first mover advantage. In comparison, the rental companies run on a very thin number of Electric Vehicles in their fleet currently but are expected to increase the same in the coming years.
: In the near future, similar trend can be observed for both the rental and limousine companies as players are competing by providing superior value-added services instead of heading towards a price war. The services include sliding scale termination policy, pooled mileage services to corporates to after rental services and guaranteed replacement of vehicles during servicing. Easy financing opportunities will be offered to both corporates as well as individuals.
Analysts at Ken Research in their latest publication observed that UAE car rental and leasing market is in a growth phase, and is recovering strongly from the economic crisis after pandemic. The primary factors that are leading to the gains in the sector are the rebounding of tourism, favorable government initiatives in the form of various events such as Expo 2020 and Abu Dhabi Grand Prix for Formula 1. Additionally, shift in customer preference towards rental and leased vehicles aided by increased technological adoption. The UAE Car Rental Market is expected to grow at a CAGR of 8.5% on the basis of revenue for the period 2020-2025F.
Europe car rental market witnessed growth during the review period 2013-2018 in terms of fleet size and revenue owing to expansion of local and international players in the market and rise in tourist arrivals in European countries. The market was observed to be at the growth stage owing to increase in investments in the market, fall in prices offered by service providers and innovative strategies adopted by companies in European countries. Profitability associated with car rental companies are highly correlated with the prices offered, operational efficiently, quality & reliability and innovative market penetration strategies adopted by the companies.
Australia Car Leasing industry was witnessed to be at the late growth stage, with unstable growth year-on-year. Low growth in new vehicle sales and the mining industry bust during the period were primarily responsible for translating low growth in the car lease industry. The industry witnessed growth at a CAGR of around 3.5% in terms of fleet size from leasing segment and 2.7% in terms of revenue from leasing segment during the period 2013-2018. The leasing market is solely built on operating lease and financial lease has not been taken into consideration.
Saudi Arabia car rental market is at the growth stage witnessing intense competition. Increase in the tourist arrivals, employment rate and growing number of establishments in the kingdom has propelled momentum to the market. The GDP of Saudi Arabia has increased considerably during the review period. The market size of construction industry in the kingdom has increased aggregating a CAGR of close to 3.9% during 2013-2018 owing primarily to the higher demand for car leasing and rental. Major car rental companies such as United International Transportation Company, Hanco, Best Rent a Car, Hertz, Avis, Key, Al Wefaq, Al Tayyar , Enterprise, Samara and others have complimented the target audience in terms of availability of wide range of services. Saudi Arabia car rental & leasing market has witnessed sound growth at a CAGR of around 12.5% in terms of fleet size from leasing segment and 4.6% in terms of fleet size from rental segment during the revenue period 2013-2018.
Covid-19 pandemic has drastically affected the supply chain in automotive sector and dampened the consumer spending in these countries, resulting in reduced sales. The growth over the years in these countries has been gradual. In Bhutan , the CAGR over the years has been positive which expounds the expansion of automotive sector in the country. Although, government in Bhutan is trying to discourage the use of private vehicles in order to meet its sustainability goals and preserve the rich environment of country by increasing the taxes. Whereas, in Bangladesh government has heavily incentivized the sector by reducing taxes; the result has been a healthy growth of the sector.
Malaysia's Used Car sector is in the late growth phase, having grown at a CAGR of ~1% during 2015-2020. Increasing demand for private vehicles, increasing purchasing power, easy availability of finance, increased govt. incentives to ensure the sale of new cars are the main reasons behind positive growth in used car revenue. Other major drivers include drop-in use of public transport due to the pandemic and emergence of online players which have made the overall process of selling and buying used cars smoothly, thus boosting sales.
Ken Research
Ankur Gupta , Head Marketing & Communications
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