The car rental and financial sectors are at odds over the easing of limits on capital companies' car rental operations. The rental car industry argues that the expansion of financial firms into their territory threatens their market, while capital companies counter that it enhances consumer choice in long-term rental options.
With the rental car market saturated, the industry fears that the encroachment of financial firms could lead to a cutthroat competition, resulting in market polarization and a collapse in used car asset values.
According to industry sources, the Korea Rental Car Business Association recently submitted a letter to the Financial Services Commission opposing the easing of limits on capital companies' car rental operations. Current regulations classify car rental as a secondary business for financial firms, preventing their rental assets from exceeding their leasing assets. The Financial Services Commission currently restricts the ratio of rental assets to 30% but is considering raising 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 companies and the mobility rights of low-credit individuals and the working class."
As of last year, the total number of licensed rental cars in South Korea was approximately 1.33 million, valued at 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 current rental car assets held by the 17 financial firms (approximately 480,000 vehicles worth 4.4 trillion won), the easing of regulations could allow them to supply an additional 48,000 vehicles (worth 450 billion won) to the market. This could drop the market share of small operators below 10%, leading to the bankruptcy of many small businesses, according to industry concerns.
A rental car industry representative warned, "If financial firms add 500 billion won worth of vehicles to an already saturated market, it could trigger a domino effect of bankruptcies among small operators. If these small businesses, which provide 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 source added, "If financial firms supply an additional 50,000 rental cars, 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 deterioration of asset soundness across the industry and threaten the ecosystem. Initially, the entry of financial firms may seem to lower prices due to increased competition, but ultimately, as competitors disappear, consumers will be bound to the prices and package deals set by financial platforms."
In contrast, the capital industry insists that easing regulations is essential. They argue that financial firms' long-term rental operations are subject to stricter regulations and tax benefits than those of the Ministry of Land, Infrastructure and Transport, and therefore, the easing of limits is necessary for fairness. They also point out that unlike small rental companies that focus 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 company stated, "Leasing and rental are essentially similar products, yet we face significant restrictions on business expansion due to regulations. Capital companies are subject to the Financial Consumer Protection Act, which provides a higher level of consumer protection in terms of terms and contract processes compared to regular rental car companies. Moreover, if capital firms actively participate in competition, prices could decrease, leading to positive effects for consumers."
* This article has been translated by AI.
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