Indonesia is a very popular tourist destination in Southeast Asia consisting of 17,000 islands (6,000 inhabited). Sumatra, Java, Bali and Kalimantan are some of the largest islands and most frequently visited places by domestic and international tourists. Due to its extraordinary geography and lack of investment in public transportation, renting car is very popular and convenient way to travel in and around the city. Indonesia is the most populous country in Southeast Asia, with over 260 million people, and the practice of renting cars has been going on since decades.
The car rental industry in the country has flourished in recent times owing to significant growth in tourism. Over 5,000 car rental companies existed in the market and over ~ taxis ran across the streets in the country, as of 2016. Cars were rented both for business or leisure purpose and for short or long term requirements. Although a large number of car rental companies operated in the country, passengers had faced difficulty in getting a taxi from anywhere in the city. In addition, companies lacked professional service as drivers often took longer routes to fool passengers and taxi services were scarce in rural areas.
Increase in domestic and international tourism, improvements in airport infrastructure and increase in passenger flow at airports were addressed as primary reasons towards the growth of car rental sector in Indonesia.
Rapidly expanding middle class population of the country resulted in increased consumer spending, rising fuel prices and subsequent rise in rental tariffs and incline in number of vehicles in the car rental industry, all resulted in the positive growth of the car rental market.
The car rental market in Indonesia grew from USD ~ million in 2011 to USD ~ million in 2016 at a CAGR of ~% during the period 2011-2016.
Which Segments are Doing Well in Car Rental Market in Indonesia?
In terms of revenues, the car rental market was dominated by organized players. The organized sector held a share of ~% in terms of revenues in 2016. Taxi accessibility, reliability, security, predetermined rate and reasonable tariff are some of the factors which had led to higher adoption and passenger trust on organized companies operating in this space.
The organized players in the market dominate in terms of fleet size and are present abundantly in the most demanded locations. Organized car rental companies have a pre-fixed tariff rate, which varies depending on the location. There is a very less possibility of change in fares amongst taxis of the same company unlike unorganized players
Most tourists visiting Indonesia and domestic nationals preferred renting out car on a daily or monthly basis and drive around the city themselves. Since the market for car rental services in Indonesia is tourist driven, it is the most convenient option for tourists who wish to travel to different locations around the city without the necessity to book multiple cabs from several points.
Non-chauffer driven car rental services are charged lesser than a chauffeur driven service and a customer retains the possession of the car for the entire contract term. The trend of non-chauffer car rental services has witnessed an incline in recent times since latest technologies are available to the passengers which help them in locating places with ease. Now people can easily locate their destination with the help of a GPS enabled mobile phone. In the light of these facilities the customers, especially tourists, prefer to opt for a leasing cars and driving it themselves.