Many firms pushed to brink of bankruptcy, recession
KUWAIT CITY, July 26: Car rental companies are worst hit in the current period due to the corona pandemic, which has pushed many companies working in this sector to the brink of bankruptcy and recession, and making them groan economically, as described by workers in this field, reflecting on the daily and monthly car rental rates, reports Al-Qabas daily.
Figures indicate the rate of decline in the car rental sector in Kuwait since the beginning of the pandemic reach 60 percent, confusing the market and putting the rental offices in front of major challenges.
It has become difficult to remain in the market in light of the huge monthly obligations to car suppliers, as well as office rents and employee salaries, coupled with the reduced market value of cars.
According to those operating in the car rental sector, the average size of the monthly car rental companies’ installments and financial obligations to suppliers ranges between 15,000 and 20,000 dinars per month, while this amount increases or decreases according to the number of cars owned by each company.
The additional costs include wages of employees, rent of showrooms and other costs. They pointed out that the operators are facing massive obligations in the absence of support and government solutions, and find themselves in a real dilemma, causing many of the companies fail their payment obligations, as others were forced to pay part and consider what is left over as debt to be paid when conditions improve.
The same sources said: “80 percent of car rental offices in Kuwait depend on financing their vehicles by installments, which created a real crisis in the sector after many offices failed to pay their monthly installments, given that a number of finance companies did not take into account the circumstances and consequences of the current crisis, and there is continuous demand for payment of the finance installments.
In contrast, a very limited number of finance companies understood the dilemma of the car rental sector, and actually stopped collecting during this critical period.” They pointed out that during the period in which the work was stopped as a precautionary measure to confront the coronavirus, most rental offices continued to pay the monthly rentals of their offices ranging between 1,000 and 2,500 dinars, in anticipation that eviction cases would be brought against them in the absence of governmental solutions.
The sources stated that during the corona crisis, car rental prices dropped by approximately 40 to 50 percent, depending on the type of car and size. Cars rented at 10 dinars per day are now rented for 5 dinars, indicating the rental rates will continue to decrease by more than 50 percent if the situation continues.
Given the worsening economic conditions caused by the corona crisis and its impact on the salaries of some workers in private sector, car renters canceled the rent contracts and returned their cars, due to their inability to commit to payment, knowing the monthly rental value ranges between 135 and 280 dinars, but now after canceling many contracts, the value of the monthly rental ranges between 130 and 170 dinars for 2020 models.
They stressed that losses of the car rental offices operating in Kuwait International Airport was very great as the work stopped completely, noting the losses were massive and reached 100 percent. Workers in car rental agencies expected life to return to normal in October with the resumption of schools, as well as return of the ministries to work at full capacity. As a way to introduce additional revenue, albeit a little to car rental companies, many of the workers were forced to rent cars subcontracted, away from offices that were not allowed to open their activities during the ban period. And, customers were dealt with by delivering cars to their homes away from offices .
By asking the office owners about the large and luxurious rental car market, they said the market has stopped completely, as luxury car lovers who were reluctant to rent abandoned it during the corona crisis.
The luxury cars were parked in front of the offices without anybody hiring them due to the hours of the ban. They indicated the price of renting large and luxury cars decreased dramatically, as the rent for large cars ranges between 30 and 70 dinars per day, while luxury vehicles go for 70 to 250 dinars per day.
Some owners of car rental offices said the demand for small cars has become greater after stopping taxi, because taxi drivers and others losing their livelihood searched for another source of income in the field of order delivery, so they went toward renting small cars to meet the purpose of delivery. In line with the current crisis, the car rental offices changed their rental policy, as it allows for car rentals per hourly basis until the ban is due. The rental price in this case is less than the cost price.