Pivoting in a surprising strategic move, Lotte Rental Co., the foremost car rental company in South Korea, announced on Thursday that it is backtracking on its intention to explore the country’s secondhand car sales market. The company will now channel its resources to reinforce its established used car rental and commercial vehicle leasing operations, as per statements from Chief Executive Choi Jin-hwan.
The bold announcement surfaced at Lotte Rental’s CEO IR Day (Investor Relations Day) in Seoul, where Choi articulated the company’s renewed focus on fortifying areas where it already outperforms its competition. He strongly asserted, “We plan to bolster our market dominance and raise profitability within our current businesses.”
Under the new strategic plan, Lotte Rental aims to amplify its used car rental and commercial vehicle leasing services, consolidate its position within the short-term car rental and car sharing domain, scout for overseas business opportunities, and penetrate the robotics arena via its general rental sector.
The ambitious roadmap for Lotte Rental includes an overhaul of rental products, a restructuring of sales channels, and the development of robust supporting infrastructure, with a completion deadline set for the end of July. Aligning with the rising demand for electric vehicles, Lotte Rental also aims to scale up its commercial vehicle leasing program through its subsidiary, Lotte Auto Lease Co.
This strategic detour transpires amidst a slowdown in Korea’s secondhand car market. Even though the market is valued at a staggering 30 trillion won ($23 billion) annually – double that of the new car market – buyer interest has flagged due to economic instability and escalating interest rates, leading to a surge in the cost of auto loans.
Both Lotte Rental and Hyundai Motor Co. had previously revealed their intentions in 2021 to penetrate this previously restricted market. Despite the current market slowdown, Hyundai remains unwavering, gearing up to launch a broad marketing campaign this October.
Revising its financial targets, Lotte Rental now aims for an impressive annual operating profit of 490 billion won on sales of 3.67 trillion won by 2025, propelled by a rental fleet of 340,000 cars. In the near term, Lotte Rental is setting its sights on elevating its annual sales target by 25% year-on-year. Within its general-purpose rental services, the company is targeting a fourfold increase in sales revenue by 2027.
Despite the raft of significant announcements, Lotte Rental shares witnessed a slight dip of 0.7%, closing at 27,900 won, trailing behind the broader Kospi market’s 0.6% uptick.
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