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UNIT 11 CAR RENTAL AGENCY OPERATIONS

Structure

11.0 Objectives
11.1 Introduction
11.2 Concept of Car Rental Agency
11.3 Rent-a-Cab Scheme
11.4 Present Scenario of Rent-a-Cab
11.5 Identification Features
11.6 Marketing of Rent-a-Cab
11.7 Considerations for Product Design
11.8 Let Us Sum Up
11.9 Clues to Answers

11.0 OBJECTIVES
After going through this Unit you will be able to:

• understand the conceptual phenomenon of Rent-a-Car,

• understand complexities associated with establishing your car rental agenc y,

• know role of authorities related with the operation of this activity, and

• distinguish among different types of cars available for renting in the market.

11.1 INTRODUCTION
Though internationally the concept of rent-a-car is quite old and successful, however, in India, it is
still at an infancy stage. Although many multinationals have entered in the operation of this activity
yet due to some or the other technical or administrative problem it has not yet taken off. The potential
of car rental business has been assessed worth Rs.2000 crores, of which only 10% is being catered by
organised sector, i.e., the multinationals running rent-a-cab schemes. It is expected in coming years
that this share would go up by 30-35%. This Unit, therefore, is structured keeping in view you as
future entrepreneur of this sector.

The Unit starts with discussing the concept of a car rental agency along with the present scenario.
Since the basic principles for establishing your own car rental agency will almost be the same as in
the case of other transport businesses, they have been left out in this Unit.

11.2 CONCEPT OF CAR RENTAL AGENCY


This nomenclature of tourist transport is an international phenomenon. Internationally the term
rent-a-car signifies that you rent a car from a location X drive it yourself, use it as per your
requirement and return the cab back to the car rental agency or its representation at a location Y.

In fact this concept provides lots of flexibility to tourists as well as business travellers to travel as
per their own requirements. Of course this remains an up budget market with certain constraints
when it comes to countries like India.

Comparatively, this is a new concept for India and is still in an infant stage.

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Rent -a-car

Use it in city
Airport and inter-city

Reach another
Departure town or city;
for Airport leave it there

It has been generally observed that Rent-a-car agency operations are on a macro-level, multi-
locational with multi-national size of entrepreneurship. Some of worldwide car rental agencies
are:
a) Hertz rent-a-car
b) Euro car
c) Budget rent-a-car
d) Thrifty rent -a-car
e) Aloma rent-a-car
f) Avis
The above are worldwide companies having operations through franchise and licensing at
different locations in different countries. Some of them exist in India also. However, most of
them operate on a chauffer driven basis and not on self drive basis. Though the Indian law
permits but due to logistic problems the concept of self-driving has not taken off so far. There are
various other reasons for this late take off. One of the major reasons is the hazardous traffic
condition and the poor driving sense prevailing on the road. Another important reason is the
security of the vehicle and this limits the market segment.

11.3 RENT-A-CAB SCHEME


In exercise of the powers conferred by Sub-section (1) of section 75 of Motor Vehicles Act, 1988 (59
of 1988), the Central Government made the following scheme “for regulating the business of renting
of motor cabs to persons desiring to drive the cabs for their own use and matters connected
therewith”. Following are the provisions of this Act (details have already been discussed in Unit 10):
1) Short title, commencement and application:
a) This scheme may be called Rent-a-Cab Scheme, 1989.
b) It shall come into force on the first day of July, 1989.
c) It shall apply to all motor cabs to which tourist permits have been issued under sub-section (9)
of section 88 of the Act and operating under a licence granted in terms of para 6.
2) Definitions: In this section unless the context otherwise requires:
a) “Act” means Motor Vehicles Act, 1988 (59 of 1988),
b) “Form” means of Form appended to this scheme,
c) “licence” means a licence granted or renewed under paragraph 6 to engage in the business of
renting of motor cabs to persons desiring to drive the cabs for their own use,

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d) “licensing authority” means the State Transport Authority constituted under sub-section (1) of
section 68 of the Act,
e) “operator” means the holder of a permit issued under sub-section (9) of section 88 of the Act
in respect of not less than 50 motor cabs.
3) Licensing of operator: No person shall engage himself in the business of renting a motor cab
under this scheme without licence.
4) Application for grant or renewal of licence:
1) An application for the grant or renewal of a licence under paragraph 6 shall be made in Form
1 to the licensing authority having jurisdiction in the area in which he resides or has his
principal place of business (hereinafter referred to as main office) and shall be accompanied
by a fee of rupees five thousand.
2) Where the applicant has, besides the main office, branch office within the jurisdiction of the
licensing authority referred to in clause (1), the application shall indicate such place with the
number of motor cabs proposed to be stationed at each such place.
3) Where the applicant has branch offices outside the jurisdiction of the licensing authority, the
application shall be made to the licensing authority in whose jurisdiction the branch office is
situated, in Form 2 accompanied by a fee of rupees one thousand in respect of each such
branch offices.
5) Scrutiny of application: A licensing authority shall, before granting or renewing a licence take
into consideration the following namely:
i) The applicant has a good moral character and has intimate knowledge of passenger transport
business.
ii) That the main office or the branch office of the applicant is either owned by the applicant or is
taken on lease by him or is hired in his name and it has adequate space for reception room,
administrative section, cloak room with locker facilities, sanitary blocks, adequate parking
space for the motor cabs.
iii) That the applicant has necessary facilities for the housing, maintenance and repair of his
vehicles,
iv) That the applicant has at least one telephone which is accessible throughout day and night,
v) That the applicant has branch offices or sub-licensee offices with telephone, in not less than 5
cities of tourist importance with facilities for housing, maintenance and repair of vehicles,
vi) That the financial resources of the applicant are sufficient to provide for the continued
maintenance of motor cabs and for the efficient management of the establishment,
vii) That the applicant maintains not less than 50 motor cabs of which 50 per cent are air
conditioned duly covered by permits issued under sub-section (9) of section 88 of the Act,
with comprehensive insurance, fitness certificate, motor vehicles tax paid up to date.
Provided that in the case of licence for a branch office situated in a place outside the jurisdiction
of the licensing authority, it shall be sufficient, if such branch office maintains not less than five
motor cabs.
6) Grant of licence: The licensing authority may, on receipt of an application under paragraph 4 and
after satisfying himself that the applicant has complied with the requirements of paragraph 5,
grant or renew the licence in Form 3 or, as the case may be in Form 4.
Provided that no application for a licence shall be refused by the licensing authority unless the
applicant is given an opportunity of being heard and reasons for such refusal are given in writing
by the licensing authority.

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7) Duration of licence: A licence granted or renewed under paragraph 6 shall be valid for a period
of five years from the date of grant or renewal.
Provided that in the case of the licence in respect of branch offices referred to under clause (3) of
paragraph 4, the validity of such licence shall be restricted to the validity of the licence granted in
respect of main office.
8) General conditions to be observed by the holder of the licence: The holder of a licence shall:
i) maintain a register with a separate page for such vehicle containing the particulars specified,
in Form 5 and where a motor cab is hired by a foreign national shall maintain a register in
Form 6.
ii) not shift the principal place of business mentioned in the licence without the prior approval
in writing of the licensing authority which granted the licence.
iii) keep the premises and all the records and register maintained and the motor cabs open for
inspection at all reasonable times by the licensing authority or by any person not below the
rank of motor vehicle inspector as may be authorised in this behalf by the licensing
authority.
iv) submit from time to time, to the licensing authority such information and return as may be
called for by it.
v) display at a prominent place in its main office and its branch offices, the licence issued in
original and certified copies thereof, attested by its licensing authority.
vi) maintain in their main office and branch offices at a conspicuous place a “complaint book”
in the Form 7 with serially numbered pages in triplicate. The licensees shall despatch the
duplicate copy of complaint, if any, to the licensing authority by registered post
expeditiously and in any case not later than 3 days.
vii) maintain a suggestion box in the main office and branch offices and forward their
suggestions received with their comments, if any, to the licensing authority, once a month.
viii) where he is having a foreign collaboration with the approval of the Government, this fact
should be displayed in the office premises, with the specific approval of Department of
Tourism of the Central Government.
9) Collection of hire charges: The holder of a licence shall collect the hire charges from a foreign
national or a non-resident Indian only in foreign exchange and shall hold for the purpose a licence
to transact in foreign exchange.
10) Duties and responsibilities of hirers of motor cabs:
1) It shall be the duty of every hirer to keep the holder of the licence, informed of his movements
from time to time.
2) If an individual or company has hired the vehicles as a leader of the tourist party, it shall be
the duty of such leader of the party to keep the holder of the licence informed of the
movement of each vehicle, from time to time.
3) If a hirer so desires, he may engage a person possessing a valid driving licence to drive the
vehicle so hired during the period of hire agreement.
11) Power of licensing authority to suspend or cancel the licence:
If the Licensing Authority is satisfied after giving the holder of the licence, an opportunity of
being heard, that he has:
a) failed to comply with the provisions of paragraph 8 or 9.
b) failed to maintain the motor cab in compliance with the provisions of the Act and Rules.

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c) any one of his employees has misbehaved with the customers.
d) any complaint against the licensee by any hirer has been proved beyond reasonable doubt:
i) suspend the licence for a specified period, or
ii) cancel the licence.
12) Appeal: Any person aggrieved by any order of the Licensing Authority under paragraph 6 or 11,
may within 30 days of the receipt of the order, appeal to the State Transport Appellate Tribunal.
13) Procedure for appeal:
1) An appeal under Rule 12 shall be preferred in duplicate in the form of a memorandum setting
forth the ground of objections to the order of the Licensing Authority and shall be
accompanied by a fee as may be specified by the State Government, by notification, in the
Official Gazette.
2) The State Transport Appellate Tribunal may after giving an opportunity to the parties to be
heard and after such enquiry as it may deem necessary, pass appropriate orders.
As an entrepreneur as well as a consumer of these services, we hope this Section will be of help to
you.

11.4 PRESENT SCENARIO OF RENT-A-CAR


Rent-a-car service operated by multinational companies have an edge over the tourist transport
operator who is comparatively small in size with limited resources. All MNCs also enjoy a
higher priority in the market list because of their brand equity. They have greater access to the
prospective customer which includes corporate hiring, travel agencies, tour operator and direct
individual passengers. This is possible for them because of their wings spread in more than one
country. Hence, they have very many arms for selling their product and sources of business
origination. Experience shows that because of the typical working conditions, quality of
employees and lack of professionalism, which prevails in India generally, has been the root cause
of the car -rental companies not being so successful. May be after you graduate from this
University and are awarded the degree of Tourism Management you become a real professional
to achieve higher rate of success and growth in this area of tourism.

11.5 IDENTIFICATION FEATURES


In order to distinguish between a private car, tourist taxi and rent-a-cab, following is the
distinction.
a) Private Car: licence plate (registration number), the base of plate is white and letters written
with black, e.g., DL 2C, DL 4C, etc.
b) Tourist Taxis: The base of licence plate is yellow and letters written with black. Besides this
distinction the registering authorities (transport department) assign different series of number
to tourist taxis, e.g., DL 1Y, DL 1Z, etc.
c) Rent-a-Cab: The base of licence plate is black, letter written with yellow. Even in this case
the series allotted is different, e.g., DL 1N, etc.
Some of the model car rental fares have been annexed herein for an idea formulation. When you
have to deal with your clients you should be aware of your multinational competitors. Although
costing and pricing methods have been discussed at length in Unit 5. Yet this idea would prove to
be useful for you as a new entrepreneur.

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A V I S R E N T- A-C A R
RATES FOR AGRA/JAIPUR/UDAIPUR/COCHIN/RISHIKESH

Car Type 1hr./10 km s. 4 hr./40 kms. 8 hr./80 kms. Airport Transfer Extra
(2hr./30 kms.) kms.

Esteem/Siena 175.00 700.00 1400.00 550.00 14

Cielo GLE 200.00 800.00 1600.00 625.00 16

Lancer 275.00 1100.00 2200.00 900.00 22

Mercedes 550.00 2200.00 4400.00 1200.00 44

Please note that:


• Short rentals available for minimum charges for 2 hours.
• After 2 hours, hourly rate will be applicable. In case the car is returned within the first 25
minutes of the additional hour, no charges will be applicable for that hour.
• For outstation trips, the extra kilometre rates for all category cars will apply, with a minimum
billing of 225 kms. per day. Chauffer outstation charges will be Rs.200/- per day and the
night detention charges will be Rs.200/- per night.
• State permits/fee, parking and taxes extra as applicable.
• Kilometre and hour will start and finish at our rental location.
• For airport transfers extra kilometre and hours would be chargeable over and above the
package.
• All cars are comprehensively insured.

11.6 MARKETING OF RENT-A-CAB


Rent-a-cab services in India are operated by multi-national companies having strategic edge over local
tourist transport operators. The perspective of marketing follows guidelines can prove to be useful
tools in successfully marketing this product:

1) Marketing Outlet at Airports


The most vital target segment for such companies should be international or domestic tourists
travelling by air. This can become possible only when you have put up well-designed signage at
easily locatable place. For example, it can be on right side of arrival exit at all gates. If possible or
according to your budgets you can install an outlet in the arrival lobby of the airports. This can
save your money on publicity or maintaining city offices available at quite high rent.

2) Marketing Alliance Through Hotels


The current trend prevailing in India is marketing in alliance with reputed hotel brands, e.g., Hertz
is marketing in India through East India Hotels, popular international brand Oberoi. This
automatically renders benefits to you as tourist can operator. Visitors, both domestic and
international, staying in the hotels, often need services of tourist transport operators and when
these hotels make available international brands within the same premises to the guest, it boosts
up your sales.

3) Through Website
Technological advancements have revolutionised the selling of services. Now as a producer or
retailer you can advertise your product(s) on web. Interested clients can contact you and convey

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their requirements as and when they come up. This also provides you International exposure.
Your websites are accessible globally. It not only provides you an international platform to sell
your product online with your competitors as well as it will provide you international publicity.

4) Marketing Through Travel Agents and Tour Operators


The best possible means of providing feasibility to tourist transport operator is liaisoning through
travel agents and tour operators. More than 70% of leisure as well as corporate travel is facilitated
through tour operators and travel agents. If you have positioned your product(s) through these
intermediaries, increase in sales will be obvious result.
Besides every possible mean of marketing, e.g., participation in seminars and conferences,
sponsoring/co-sponsoring events at all levels, and use of many other creative marketing ideas which
you can plan from time to time to combat competitors’ marketing plans.

11.7 CONSIDERATIONS OF PRODUCT DESIGN


While designing Rent-a-cab product the obvious associated problem is that of infrastructural linkages.
In developed countries where you can hire a cab at point A and leave it at point B. It is possible in
these countries because volume of business is so high that operational costs are managed. But in India
where its usage is only restricted to business or corporate travellers or even to some extent well off
domestic tourists, it is very difficult for companies to operate at such a low profit margin. This is why
declining stage of their product arrives at a much faster speed than other tourism products.
In relation to this problem Department of Tourism should incorporate the details about the availability
of these products along with other product components like accommodations, government
transportation, as well as shopping. This will help the operators to enjoy and sustain on longer product
life for there products.

Check Your Progress

1) Discuss important rules related to Rent-a-Cab under Central Motor Rules?


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2) Enlist some of the multinational operating Rent-a-Car scheme in India.


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3) Give reason for the failures of MNC in India.


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11.8 LET US SUM UP
Car rental agency operation has today become a competitive business. In the market place there
is stiff competition between local operators as well as multinationals. Although these
multinationals are in process of establishing themselves but since their clientele is up market
segment so they are targeting them as their niche whereas local operators who command control
over 80% of rent -a-cab market. So, multinational will not only have to provide the best services
at competitive prices but will also have to create sound infrastructure with a great deal of
investment.

11.9 CLUES TO ANSWERS

Check Your Progress

1) Refer Sec. 11.3.

2) Refer Sec. 11.2.

3) Refer Sec. 11.4.

ACTIVITY

In the present times of cutthroat business competition setting up of any business establishment is a
very tough task. If you are able to succeed in making an entry in to this world you face the
difficulty of sustaining in the market. Though in India, for long corporate world has been banking
upon private/individual providers of car rental services, yet a large number of young corporate
executives have started using branded vehicles to gain status in the society. This is primarily
because they have been travelling extensively across the world.

Keeping in view this emerging trend, visit some of the private/individual providers of car-facilities
and also any one of the multinational operating in your area/region. Try to find out what else
motivates these corporate executives to switch over to international brands besides maintenance of
their status.

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