WARISAN TC Holdings Bhd’s decades-old car rental business, under the Mayflower Car Rental brand, is getting a technology reboot after it acquired a car-sharing start-up.
This is the quintessential tale of “old business meets new business”: An established family-backed conventional enterprise bets on a tech start-up to help its business subdivision turn things around.
On Feb 12, Warisan TC announced that its wholly-owned subsidiary Mayflower Acme Tours Sdn Bhd was buying a controlling 55% stake in GoCar Mobility Sdn Bhd for RM450,000. This values GoCar, a new start-up that provides online self-service car rental services, at about RM818,000.
Post-acquisition, GoCar’s team has been working on integration with its new parent company, but more can be done to reap synergy for both sides.
GoCar founder and executive director TJ Tan says the start-up has seen its growth rates “turbo-charged” after the acquisition. Its fleet has expanded from three cars to 47 after leveraging Mayflower’s idle capacity.
GoCar’s revenue too has been growing at a steady 10% to 15% each month, and it is on track to reach profitability sooner than expected.
Additionally, its team is in talks with Mayflower to see how the start-up can be more deeply integrated into the established car rental business.
Essentially, Mayflower’s operation could use the technology and online boost that GoCar offers since the former’s business is largely bricks-and-mortar based. This is crucial, not only for defending its market leadership position but also acquiring new customers.
GoCar is different from traditional car rental companies in several ways. Firstly, conventional businesses insist on a minimum rental period of one day while GoCar facilitates rentals by the hour, day or month.
Its advertised rates are RM14.90 per hour (including fuel and insurance) or RM99 a day (inclusive of insurance but exclusive of fuel). Longer rentals are priced at RM1,980 a month, which works out to be about RM66 a day.
Secondly, GoCar employs a self-service model powered by technology. In essence, users do not need to talk to a member of the staff or pay cash at a counter to rent its vehicle.
Bookings can be made via a mobile app or on the company’s website. Users then head over to their preferred GoCar pickup point and unlock the car using the app. Once inside, they will receive a pin code to unlock the car keys that are kept in a box inside the vehicle.
The start-up has cars in various locations, such as Kuala Lumpur, Mont’Kiara, Mid Valley City, Bangsar, Petaling Jaya, Shah Alam, Kuala Lumpur International Airport, klia2 and Cyberjaya.
Tan says the form of GoCar’s integration with its parent is still being ironed out but there are a lot of areas to explore.
“They see us as an attractive point because we can do 24/7 rentals. That’s something they cannot do because they always need someone around to man the counter, unlock the cars and so on.
“That’s probably good for corporate leasing but in today’s landscape, the on-demand factor is so important. They need to be in that market,” he adds.
Warisan TC certainly recognises the new environment its car rental business is competing in. It is not content to bank on its established brand and market leadership.
Having been in the business since the 1960s, Mayflower currently has the largest fleet in Malaysia, with about 3,000 vehicles, and a 17% market share, Tan says, citing a recent market survey report.
The broader car rental business has seen fierce competition among players, both licensed and otherwise, amid lower take-up from corporates and travellers.
Warisan TC’s car rental business is housed under its travel and car rental division, which also provides services such as inbound and outbound tours, corporate travel, airline ticketing and coach rentals.
The two largest contributors to the group’s earnings are its machinery division and travel and car rental division, which contributed about 45% and 43% respectively to revenue in FY2015.
Warisan TC also derives some earnings from selling light and heavy commercial trucks, pickup trucks, cosmetics, hair care, lingerie and used vehicles.
Its earnings have contracted sharply in the past two financial years. Net profit barely reached RM800,000 in FY2015 and RM1.4 million in FY2014, compared with RM34 million in FY2013.
According to the company’s annual report for FY2015, its travel and car rental segment saw revenue fall 6.5% to RM192.5 million from RM205.9 million the year before, dragged down by lower rentals. Nevertheless, the segment’s profit grew 4.6% to RM52 million due to lower operating costs.
More recently, in its third quarter ended Sept 30, 2016, Warisan TC posted a net loss of RM1.03 million compared to a net profit of RM3.32 million in the previous corresponding period. For the nine months ended Sept 30, net losses widened to RM4.48 million from RM534,000 the year before, with revenue dipping 2.4% to RM332.14 million.
It is against this challenging backdrop that Warisan TC is betting on technology initiatives and a start-up like GoCar.
The latter has about 1,600 users at present, mostly aged between 21 and 40. They are used to ride-sharing and car-sharing services that have become ubiquitous.
“When we speak to our users, some say they use our service because their car is in the workshop or they need a second car. Some of them just rely on public transport, ride-sharing and car-sharing to get around. They really live that life,” says Tan.
Tan is amongst those who believe that it is not essential to purchase a car anymore.
While working in Australia, Tan frequently used car-sharing services and when he visited Malaysia, he would rent a car. Over the years, he noticed that Malaysia’s car rental business had remained stuck in a groove.
“I realised it was a business opportunity and I wanted the service for myself. If no one was going to do it, then I would do it,” Tan quips.
Apart from integration with its parent company, GoCar is working on a number of things to grow its services on multiple fronts next year.
It plans to add more vehicle varieties to its fleet. Currently, its fleet is mostly made up of Nissan Almera sedans but it may add premium cars, four-wheel drives and eight or nine-seater vehicles.
Next month, GoCar will launch its first outpost outside the Kuala Lumpur/Klang Valley area by placing nine cars in Langkawi, which has a large car rental market to cater for tourists.
After Langkawi, it is looking to expand to Johor, with Tan anticipating demand from visiting Singaporeans and students at the EduCity precinct.
GoCar is also piloting a hub-to-hub rental solution where users can pick up a car from one location and drop it off at a different point, such as from its hub in Bangsar to KLIA.
Tan concedes that it is quite difficult to implement the logistics and technology to make this possible, but the company is willing to give it a try.
“We have some solutions that we think will work. We think it will be a lucrative route and a new method for customers to go to the airport,” he says.
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's App Store and Android's Google Play.