SEOUL, May 11 (Korea Bizwire) — South Korean car rental companies are experiencing an unexpected boom, taking advantage of the shortage of new cars resulting from the semiconductor chip crisis.
Lotte Rental Co., the No. 1 player in the nation’s car rental market, reported record first-quarter results, posting sales of 648 billion won ($507 million) and operating profit 70.5 billion won, up 10% and 43.4%. respectively, compared to a year ago.
Industry No. 2 SK Rent A Car Co. reported sales of 310.9 billion won and operating profit of 22.9 billion won in the first quarter of this year, breaking through the 300 billion won in quarterly sales for the first time in its history.
The main driver behind the strong performance of car rental companies is the long-term car rental business, which accounts for around 60% of their profits.
Since car rental companies enter into contracts with customers after securing the cars in advance, their delivery time is very short.
When it comes to popular models like Kia Corp.’s Carnival minivan. and Hyundai Motor Co.’s Grandeur sedan, customers have to wait 14 months and 6 months respectively to receive new cars.
The delivery of rental cars, however, only takes two or three days.
Compared to buying new cars, leasing is more expensive. However, users can replace the vehicle each time their annual contract is renewed, and have the rental company pay for maintenance.
Kevin Lee ([email protected])