The car rental and financial sectors are at odds over the easing of limits on capital firms' car rental operations. The car rental industry argues that this move threatens their market share by allowing financial firms to expand their reach, while capital firms counter that it enhances consumer choice in long-term rental leasing.
With the car rental market already saturated, industry players fear that the expansion of financial firms into rental services could lead to a cutthroat competition, resulting in market polarization and a collapse in the value of used car assets.
On July 15, the Korea Rental Car Business Association submitted a letter to the Financial Services Commission opposing the easing of limits on capital firms' car rental operations. Current regulations classify financial firms' rental car businesses as 'ancillary operations,' preventing their rental assets from exceeding leasing assets. The Financial Services Commission currently restricts the rental asset ratio of financial firms to 30%, but the proposed regulation would raise this limit to 40%.
A representative from the Korea Rental Car Business Association stated, "With only 17 financial firms controlling 44% of the market among over 1,000 rental car operators, easing regulations would undermine the survival of small rental businesses. If large financial firms strengthen their dominance through a combination of rental and financial products, it would negatively impact the survival of small rental operators and the mobility rights of low-credit individuals and the working class."
According to the Korea Rental Car Business Association, as of last year, there were approximately 1.33 million licensed rental cars in South Korea, valued at around 10 trillion won. Currently, Lotte Rental (21.8%) and SK Rent-a-Car (16.5%) dominate the market with a combined share of 38.3%, while 17 financial firms hold 44%, leaving the remaining 1,000 small operators with 17.7%.
Considering the 480,000 rental cars (valued at 4.4 trillion won) held by the 17 financial firms, the proposed regulatory easing could allow them to supply an additional 48,000 cars (worth 450 billion won) to the market. This could drop the market share of small operators below 10%, leading to potential bankruptcies among many small businesses.
A representative from the rental car industry expressed concern, stating, "If financial firms inject an additional 500 billion won into an already saturated rental market, it could trigger a domino effect of bankruptcies among small operators. If these businesses, which have provided mobility and financial security for low-credit individuals, collapse, it would block access to rental vehicles for the working class, freelancers, and small business owners who rely on them for their livelihoods."
Another industry representative warned, "If financial firms add 50,000 rental cars to the market, it would lead to a crash in used car prices, damaging the residual value of vehicles held by existing operators. This would result in a decline in asset soundness across the industry and threaten the entire ecosystem. Initially, the entry of financial firms may seem to lower prices due to increased competition, but once competitors disappear, consumers will be left dependent on prices and package deals set by financial platforms."
In contrast, the capital industry insists that regulatory easing is necessary. They argue that financial firms' long-term rental operations are subject to stricter regulations and tax benefits than those overseen by the Ministry of Land, Infrastructure and Transport, and therefore, the easing of business ratios is warranted for fairness. They also note that unlike small rental firms focused on short-term rentals in tourist areas, financial firms deal with long-term rental and leasing products lasting three to four years, creating a fundamentally different competitive landscape.
A representative from a capital firm stated, "Leasing and rental are essentially similar products, yet we face significant restrictions on business expansion due to regulations. Capital firms are subject to the Financial Consumer Protection Act, which ensures higher levels of consumer protection in terms of terms and contract processes compared to regular rental car companies. Moreover, increased competition from capital firms could lead to lower prices, benefiting consumers in the long run."
* This article has been translated by AI.
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