Market Entry Strategies and Emerging Opportunities in the Car Rental Industry in South Korea - PDF by InfinitiResearch

VIEWS: 44 PAGES: 54

More Info
									                           Market Entry Strategies
                           and Emerging Opportunities in
                           the Car Rental Industry
                           in South Korea
                           Industry Forecast Report

                           Reference code: TT0014MR
BRICdata
                           Published: March 2012
John Carpenter House
7 Carmelite Street
London EC4Y 0BS
United Kingdom
Tel: +44 (0)20 7936 6400
Fax: +44 (0)20 7336 6813


www.bricdata.com




                                                      www.bricdata.com
EXECUTIVE SUMMARY



1 Executive Summary
The South Korean car rental industry grew significantly during the review period (2007–2011), registering a CAGR of
8.41% and valuing KRW9.8 trillion in 2011. Economic growth and government initiatives to increase tourism remain the
key industry drivers. The industry is projected to value KRW14.0 trillion by 2016 and record a forecast period (2012–2016)
CAGR of 7.30%.
Increasing GDP and foreign direct investment positively impacted the South Korean car rental industry
South Korea recorded steady levels of GDP and foreign direct investment (FDI) growth during the review period, spurred
by expansion in the car rental industry. South Korean GDP at constant prices grew from US$683.2 billion in 2007 to
US$775.7 in 2011, recording a CAGR of 3.22% during the review period. GDP is projected to grow from US$808.1 billion
in 2012 to US$948.1 billion by 2016, at a CAGR of 4.08% over the forecast period. Robust economic growth, backed by
strong GDP growth is projected to drive the growth of car rental companies operating in the South Korea. FDI reached
US$673.9 billion in 2010, growing at a CAGR of 7.54% during 2007–2010. Such growth, primarily in the service sector, is
expected to support the growth of the car rental industry in South Korea over the forecast period.
The growing volume of leisure and business passengers drove the demand for rental cars in South Korea
The South Korean car rental industry was primarily driven by the rising volume of leisure and business tourists. Leisure
tourist volumes increased from 90.8 million in 2007 to 114.0 million in 2011, registering a CAGR of 5.85% during the
review period. In order to promote tourism, the South Korean government launched a campaign called “2010–2012 Visit
Korea Year” in 2009. The total leisure tourist volume is projected to increase from 126.4 million in 2012 to 192.3 million by
2016, growing at a CAGR of 11.06%. Furthermore, the total number of business tourists in South Korea increased from
29.3 million in 2007 to 36.2 million in 2011, registering a CAGR of 5.43% during the review period. Economic growth has
led to an increase in business tourists, which is projected to rise from 40.1 million in 2012 to 60.9 million by 2016,
registering a CAGR of 10.96% over the forecast period.
Domestic and inbound tourist expenditure on travel and transport will maintain industry confidence
The total domestic tourist expenditure on travel and transport reached KRW7.7 trillion in 2011, an increase of 10.1% over
2010. Overall, travel and transport expenditure by domestic tourists registered a CAGR of 4.87% during the review
period, and is forecast to grow from KRW8.6 trillion in 2012 to KRW14.1 trillion by 2016, registering a CAGR of 13.11%.
The total international tourist expenditure on travel and transportation increased from KRW1.4 trillion in 2007 to KRW2.9
trillion in 2011, registering a CAGR of 20.34% during the review period. The figure is projected to increase from KRW3.2
trillion in 2012 to KRW5.0 trillion by 2016, registering a CAGR of 12.17% over the forecast period. The collective domestic
and international tourist travel and transportation expenditure is expected to reach KRW19.1 trillion by 2016, registering a
CAGR of 12.86% over the forecast period. Such growth in domestic and inbound tourist expenditure is expected to create
new business opportunities for car rental companies in South Korea.
Car rental companies are consolidating their business to broaden their market share
Companies in the South Korean car rental industry are entering into mergers and acquisitions (M&As) in order to broaden
their market presence and expand their market shares. For example, KT Corp. acquired one of the leading South Korean
car rental companies, Kumho Rent-a-Car, from Kumho Asiana Group, to merge with its existing automobile rental
business, KT Rental. This merger formed KT Keumho Rent-a-Car, South Korea’s largest car rental company, accounting
for a market share of 30%. The merger also helped the company to expand its presence in 130 locations and its fleet size
to 60,000 vehicles.
Franchise and licensing models remain the main market entry models for international companies
International companies are utilizing franchise and licensing business models to enter into the South Korean car rental
industry. Leading international car rental company, Sixt operates in 20 locations across all major cities in South Korea
through its franchisee partner. Avis operates through its licensed unit, Aju Autorental Co. Ltd, which is a wholly owned
subsidiary of Aju Group. The licensed unit has operations in 130 locations across South Korea. Companies consider
franchise and licensing business models to be a cost-effective way of expanding their operations, rather than incurring the
costs associated with establishing a subsidiary business.




Market Entry Strategies and Emerging Opportunities in the Car Rental Industry in South Korea                           Page 2

© BRICdata. This product is licensed and is not to be photocopied                                        Published: March 2012
TABLE OF CONTENTS



TABLE OF CONTENTS
1         Executive Summary ......................................................................................................................... 2
2         South Korean Car Rental Industry Market Environment ................................................................ 7
2.1       Macroeconomic Fundamentals ........................................................................................................... 7
2.1.1     South Korea – GDP at constant prices ............................................................................................... 7
2.1.2     South Korea – inflationary forecast and car rental industry outlook...................................................... 8
2.1.3     South Korea – FDI Inflows by Sector .................................................................................................. 9
2.1.4     South Korea – annual disposable income ......................................................................................... 10
2.1.5     South Korea – unemployment rate ................................................................................................... 11
3         Market Size and Growth Potential ................................................................................................. 12
3.1       South Korea Car Rental Industry – Market Size ................................................................................ 12
3.2       South Korean Car Rental Industry – Airport vs Non-Airport Locations ............................................... 14
3.2.1     Demand for rental cars at airport and non-airport locations is increasing ........................................... 14
3.2.2     South Korean car rental industry – car rental industry for airport locations......................................... 15
3.2.3     South Korean car rental industry – non-airport locations ................................................................... 17
4  
								
To top