Tourism is a component of modern Vietnamese economy and has received increasing number of tourists over the years owing to various tourist destinations in the country including Saigon Notre Dame Cathedral, Temple of Literature, Hoan Kiem Lake, My Khe Beach, Khai Dinh Tomb, Imperial Citadel and others. Earlier the tourists used public transportation such as buses, trains, airplanes and other transportation modes such as two-wheelers. The population of Vietnam has increased over the years with rising expats due to lucrative business opportunities. Rising population coupled with increase in tourism created a space for car rental companies to launch as a model for transportation in the country. The car rental companies started their business with the introduction of chauffeur driven car rental services in Ho Chi Minh City with unorganized players operating in the space.
Vietnam car rental market evolved from a total unorganized market to a market consisting of both organized and unorganized players with the introduction of various international car rental companies in the market over the years. Car rental services in the country started by the introduction of these services in Ho Chi Minh City. Currently, these services operate in various cities including Binh Duong, Dong Nai, Vung Tau and various others varying on the companies providing the services. The car rental market was based on the chauffeur driven cars in the past but with the changing trend, the market has evolved and cars without chauffeurs are the preferred choice of people. Moreover, the booking system has changed with internet penetration and rising smart phone users over the years.
Organized and Unorganized Segment in Vietnam Car Rental Market
The organized players led the car rental market in Vietnam with ~% revenue share in 2016 due to increasing number of domestic and foreign companies setting up their corporate office in the country and number of players increasing their fleet size over the years. Moreover, many players have launched their websites and mobile apps. They are creating their business online also to increase the convenience for customers. The rental comparison portals such as Expedia, Car Rentals, Skyscanner and others also help in revenue generation for these players as various customers book the services through these portals.
The revenue share generated from the unorganized players is lower than the organized companies due to the customers preferring organized players owing to the popularity and brand name. These players have not yet shifted to the online mode of booking such as mobile apps, which leads to the online customers not taking car rental services from these companies. In Vietnam, ~% of the total car rental bookings are done through online mode such as websites or mobile applications and since unorganized players are accessible through offline modes, they lose a large share of customer base.
Non-Chauffeur and Non-Chauffeur Driven Cars in Vietnam Car Rental Market
Self-driven cars generate higher revenue and accounted for ~% revenue share of car rental market in Vietnam as they include two types of customers including who prefer self driving and the customers who rent a car and afterwards hire a chauffeur from some other company. Moreover, tourists prefer to visit multiple destinations and self-driven cars are more economical as they don’t have to pay driver’s charge or for food and accommodation. The companies that sign car rental contract hire a driver from outside due to pricing advantage and hence this sector leads to high revenue generation from car without chauffeurs.
Chauffer driven cars generate lower revenue compared to car without chauffeurs and accounted for ~% revenue share in car rental market in Vietnam during 2016 as a result of the increasing popularity of customers hiring self driven cars. This segment is captured by the international tourists who prefer chauffeur driven cars as the drivers have information about the tourist attractions. Moreover, the chauffeur driven cars have an advantage of not going through extra procedures such as showing original ID card, passport, license and mortgaging 1 motorcycle or VDN ~ million in cash which are required in case of hiring a self-driven car.
Business and Leisure Trips in Vietnam Car Rental Market
Car rental hiring for leisure purposes generated higher revenue as compared to car rental services opted for business purposes because of high number of domestic and international tourists preferring car rental services over public transport. In 2016, this segment accounted for ~% of the total car rental market revenue in Vietnam. The tourists not only hire chauffeur driven cars but also cars without chauffeurs. The self driven concept coupled with easy method of converting the international driving license to Vietnamese driving license has led to increase in the tourists preferring to rent a car without chauffeurs as it gives them freedom to travel around.
Car rental market generated lower revenue from business clients as compared to the cars hired for leisure purposes as the companies prefer to take cars on lease rather than renting them for short term. In 2016, it accounted ~% of the total revenue of car rental market in Vietnam.
These include two categories of people namely the customers travelling for official purposes or the companies hiring the car rental services for their employees. There are fewer companies that give contract to the car rental companies for these purposes as many companies do not offer the commutation facilities to the employees.
What are the Major trends and developments in Vietnam Car Rental market?
Promotions and Discounts to Attract Customers: Vietnam car rental companies have been introducing discounts and promotion in order to retain the old consumer base in the country. The increasing competition and number of players in the market has led to a competitive scenario which has led the companies to introduce competitive pricing and to have an edge over competitors.
Car Rental Companies Shifting to Mobile Apps: The cab aggregator companies such as Uber and Grab run on the mobile app business model and the popularity of these apps has been rising with elevated internet penetration and increase in number of smart phone users. Various car rental players such as Vinasun, Hertz, Avis and others are also shifting to mobile apps to increase the convenience for customers and to increase the consumer base.
Consolidation of Vietnam Car Rental Market: The car rental market in Vietnam consists of both organized and unorganized players. The market has experienced various mergers and acquisitions over the years. Moreover, international players have expanded by entering in Vietnam car rental market. There is a transformation of Vietnam car rental market from unorganized market to the organized market.
Rising Demand of Car Rental Services by Increase in Number of Tourists: Few trends that have led to increase in Vietnam tourism include rise in Chinese and Koreans travelers to the country making ~% and ~% year on year growth respectively, 15-day visa-free policy for France, Germany, UK, Spain, Italy and Belarus increased investment in air travel infrastructure and others.
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