Lessons from The West for Chinese Rental Car Executives

Mike Kane VRCG, Inc.2013 Car Rental Show

Las Vegas

Mike KaneVRCG, Inc.

• 35 Years Experience• 20 Years with Enterprise• VRCG is 12 years old • We:

– Buy cars– Sell cars– Move cars– Stay in business

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What Chris Brown asked me to do…

• Distill what I know successful rental companies have done in North America

• Offer some views as to what any successful rental company, to a greater or lesser degree, must continue to do remain competitive

• Give you a “take away” that you might be able to implement when you go home

• Thank you for coming…I know that time and money is a big commitment

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Your Organization – General Categories of what you need

• Capital/Money• Insurance• How to Buy Cars• How to Sell Cars• How to Fix Cars• Marketing Plan• Customer/Operations Expertise• Administrative Expertise• A shareholder/owner Culture• ….And a “People Plan” to execute it all

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Money/Capital

• Without capital and/or borrowing capacity, your ability to expand in a capital-intensive industry will be limited

• The best companies have strong balance sheets, very conservative approaches to spending, and believe in keeping their “powder dry”

• Enables you to expand when others contract, or weather financial storms

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Insurance

• As China becomes a bit more Western, beware the rise of lawyers

• Ensure you are covered for unusual occurrences, which in turn become usual

• Scams abound• Subsets are loss control, vehicle

repair/subrogation/ etc. but this needs to be a core competency

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How to Buy Cars

• You aren’t really in the car rental business; you are in the “car business” and you should realize this

• A high level person or group in your company needs to focus on this every day

• If depreciation/car costs are >40% of revenues, find another business. Target 27.5%-35% of revenues

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…This is minimum of what a fleet planner should spend their time

on!

People, 20%

Other, 30%

Fleet, 50%

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How to Sell Cars

• See previous slide!• Explore every available “sale channel” such as

dealer direct, auctions, retail, etc. • The remarketing group must understand their

numbers (next slide)• Fixing cars is a subset of this…must keep them

the road, safely and economically, to keep fleet utility up

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Calculate Your Holding Cost

$20,000 Capitalized Cost of Unit - $16,500 Operated it for 14 Months $ 3,500 Actual Total Depreciation

$3500/14 months = $250 actual month dep. Or1.25% per month

Then add Interest CostsYou can also drill this down to “depreciation per day” if you’d like, to compare to your daily dollar average or average daily rate

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Marketing Plan

• Define who your client base is– Airport?– Local?– High end/luxury?– Commercial / truck / etc.?– Beware trying to be all things to all markets

• Web presences• Deals with Orbitz, Travelocity, etc.• Deals with smaller reservations entities (ACE, etc.)• This is a huge deal and will get ever-bigger

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Customer-Facing Operations

• This is how you keep customers coming back• This is also how you drive them away• There are 100 things that can go wrong• It’s very detail oriented with 25 ways to make,

or lose, money• A balancing act where all the things we’ve

talked about come together for a good, or bad, or profitable, or not, experience

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People/Employee Plan

• Without a good people/Human Resources plan, your business will not do well

• Company Culture is bedrock and must be set by ownership

• Without good people, or at least trying to get good people, you’ll not do well

• This process never ends. People change jobs all the time.

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Where Does Your Company Stand?

• Good Culture and sharp owners?• Good operators in all the different areas of

the business?• Trying to get better all the time?• You’ve picked a tough industry - without

constant improvement your chances for success decreases

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Contact

• Mike Kane or Dave Arney• Royal Oak, Michigan• mkane@vrcg.com• 248-298-0509• www.vrcg.com

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