With higher fuel costs and interest rates dampening domestic automobile sales, Krungthai Car Rent and Lease Plc (Kcar) took a different view yesterday.

The company expressed optimism for the future of the local car rental industry, particularly with increased interest from corporate clients wishing to outsource the purchase and maintenance of company vehicles to reduce operating costs.

"We are confident in our operating lease service, which is proving to be the right solution for clients in the corporate sector," said managing director Pithep Chantarasereekul.

He said the company gained between 30 and 40 new corporate clients in the first half of the year, the same number as for the whole of last year. Kcar currently provides operating lease services to more than 300 corporate clients.

Under an operating lease contract, Kcar purchases vehicles according to a client's requirements and provides a financial leasing service, car maintenance and replacements.

"Our performance is progressing well despite the current economic difficulties," Pithep said, adding that total revenue reached Bt458 million in the first half of the year, with a net profit of Bt86 million, down from last year's Bt89 million.

Of the profit, Bt43.7 million came in the second quarter.

He said the company is now spending Bt160 million on 200 new cars to add to its rental service.

The total value of the car rental to corporate clients industry has grown from Bt5.4 billion last year to Bt6.6 billion so far this year.

Kcar has an 11-per-cent share of the market, which is expected to grow by a further 10 per cent before the end of the year.

Pithep said that in today's economic environment, business organisations are concentrating on their core activities, to gain maximum profit. They are outsourcing many non-core activities, including the purchase, maintenance and replacement of vehicles. Vehicle expenses are considered non-viable investments because companies cannot claim any tax deductions and have no control over maintenance costs.

"We are convinced the car rental business still has a high potential for growth despite the present economic difficulty. We currently have 4,000 cars rented out to clients and more than 200 cars ready for replacement," Pithep said.

The company's income from its car rental business increased to Bt169.5 million in the second quarter of this year. Its net profit also rose from Bt41 million in the second quarter of 2005 to Bt43.7 million this year.

Pithep said his company's performance was satisfactory, given the fact that many companies are starting to show negative financial results because of increasing oil prices and the general economic slowdown.

The company has been in the car rental business for more than 25 years. It integrates its car rental service with its other businesses, including local Toyota and Nissan dealerships, Krungthai Toyota and Krungthai Nissan, and a used-car sales business called Toyota Krungthai Used Car.

Its related businesses have helped Kcar to offer its car rental services at more than 10 per cent less than its competitors, Pithep said.

Kwanchai Rungfapaisarn

 The Nation