Standish Self Drive, one of the major players in van and truck rental in the UK, has gone into administration with debts of £3 million. According to market analysis firm Datamonitor, the company has been a victim of falling residual values and increasing price competition over recent years – in line with most of the vehicle rental industry in the UK.
During 1998, residual values for vans and trucks fell by approximately 10%, and continued to decline into the first half of 1999, although at a slightly slower rate. This, coupled with the competitive contract rates rental companies have set in an attempt to retain market share, has dented the profitability of rental and leasing companies in the UK.
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During 1998, Northgate also felt the pinch from a strong decline in residual values, despite experiencing a £28 million increase in overall turnover over the six-month period to the end of October 1998. Half-year profits fell from £16 million during the six-month period to October 1997 to just £15.1 million for the equivalent period in 1998. However, through careful planning and residual value forecasting, the company expects to improve its performance during 1999.
In contrast, Standish Self Drive is now under administration with over £3 million of debt. Datamonitor forecasts the trends of falling residual values and fierce competition will continue to put pressure on rental and leasing companies into the future. The leasing industry will be the hardest hit, as leasing companies are being forced to honour long contract agreements originally based upon optimistic residual value predictions. Several leasing contracts are therefore amassing sizeable losses, leading to lower overall profit margins in the industry.
Europcar and Northgate have recently formed a close alliance in an attempt to provide a total rental solution for companies requiring both cars and commercial vehicle rental fleets. The synergies between the two companies will expand their existing customer base, improving the overall revenue potential within the market. They also present an opportunity to withstand the increasing competitive pressures of the market.
According to Datamonitor’s automotive analyst Mike King, “Standish Self-Drive could be in a position to benefit from an alliance of this type, which would improve its future revenue stream and at the same time enable it to access a wider audience. Smaller van and truck rental companies have suffered from fierce competition in the UK market, and alliances may be the way for them to increase competitiveness.”
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