Singapore: Car Rental Business Boom
It is notoriously expensive to own a car in Singapore. The government’s efforts to curb traffic overcrowding on an island with limited land and even less road space have lead to multiple regulations enforced by the Land Transport Authority.
Even before buying the car, one has to bid for a limited Certificate of Entitlement (COE), which starts from SGD77 000 for a 1600cc vehicle. Then, there are the augmented miscellaneous fees, which include import duty, registration fee, road tax, insurance and the hefty Electronic Road Pricing (ERP) to control traffic jams during peak hours.
Although the highly efficient and well-managed public transportation system in Singapore has allowed citizens to get by their daily lives without the need of a car, there are times when convenience and status require their own set of wheels. Despite the restrictions and high costs, more and more households are becoming vehicle owners. The situation is ripe for car rental and leasing businesses to grow; in effect, reduce the number of cars on the island while still providing locals with a car when they need one.
According to Adrian Lee, the co-founder of Drive.sg, the car rental industry totals to about SGD400-500million per annum. Drive.sg is relatively young – established in 2011 to allow users to simultaneously compare and book packages from 30 car rental services from the likes of Avis, Eurokars and Wearnes. Within a year, the number of daily car bookings processed on their site has doubled. Rentals tend to spike during the weekends and even more during festive seasons, like Chinese New Year and Hari Raya, when Singaporeans want to drive over to Malaysia to visit relatives.
Even car distributors are beginning to expand their car leasing business to individuals. Previously, car leasing was targeted to expatriates or corporate clients and usually by luxury brands such as BMW and Porsche. Now, ‘Category A’ brands like Mini, Volkswagen and Kia have expanded to leasing to Singaporeans and Permanent Residents. The lease package would cover the miscellaneous fees and maintenance cost that come with owning a car. With lease terms starting from as short as 3 months, customers do not have to worry about tying themselves down to a long-term loan and a depreciating asset.
On the other hand, innovative businesses have allowed car owners to rent out their cars to mitigate the cost of ownership. iCarsCluboperates on the notion of peer-to-peer sharing. A hardware system allows the car renters to unlock the cars using their smartphones, for convenient and secured transactions. Insurance coverage is provided by iCarsClub to protect the privately owned vehicles, so owners and renters can transact with a peace of mind. According to Eddy Zhang, CEO of iCarsClub, car owners can earn up to SGD12,000 a year by monetising their cars’ downtime. A research conducted in North America concluded that one shared vehicle can take 6 to 33 others off the road, a significant implication for the environment and traffic conditions, especially in a physically small country like Singapore.