Budget corporate car rental industry is a highly competitive industry because not only there are many players in this segment; the players must also be able to deal with thin margin. To some extent the nature of budget corporate car industry is opposite to budget segment in other industries and makes it more difficult for the players to survive. If we recall southwest's case in budget airline industry, the industry has stronger bargaining position than the buyers therefore they can reduce discretionary in client's side and put more control in the players' side while in budget corporate car rental business the buyers have stronger bargaining position because they have many options and rent in large number of cars. E- auction tender process, like Telkom did, has squeezed the providers' margin and bargaining power. Some players even dare to accept a contract that recovers very low cost of capital.

Our analysis shows that Aldira's Standard Operating Procedure (SOP) is already inline with their business objective of becoming the cost leader in this segment but some improvements can be made to lower the operating cost and put more control on Aldira's side. According to cost variance analysis there are significant discrepancies between actual and budgeted expenses. The variances exist because of some possible reasons such as the unavailability of standard for service and spare parts replacement and might also cause by mark up, especially for reimbursement cases. Therefore, to avoid the variance Aldira must put more control on their side by establishing a standard for services and parts replacement.



The control can also be increased by creating new workshop networks and hiring more people to increase man to rented car ratio. The result of abnormality analysis shows that Aldira still liable for client's mistakes, the expenses which should be borne by client and insurance company. The abnormality occurred because of the ambiguity or vague de[mition of own risk and shared responsibilities between providers and clients in the contract.

Until today, Aldira's actual total maintenance cost is still below the limitation, which is 3-4% of car's price, because some client didn't perform routine maintenance cost in authorized workshop continuously but even so, actually the Internal Rate of Return (IRR) of Aldira's car rental business is still below Sertifikat Bank Indonesia (SBI) rate which means that there are many investment alternatives that can provide higher rate of return.

To recover high cost of capital Aldira must perform cross subsidy between premium cars such as Toyota Camry and Altis with Multi Purpose Vehicle (MPV) cars such as Innova, Avanza and kijang pick up because premium car is a profit center while MPV car is more as a cost center. The MPV status as cost center could be leveraged to profit center by changing the routine maintenance policy of those cars from authorized workshops to regular workshops to increase revenue to total maintenance cost ratio. If it's not possible than fleet structure should be arranged in such a way that enable cross subsidy by taking account the number of cars rented, price rate, rental period and non routine maintenance margin.



Research Location : PT Aldira Berkah Abadi Makmur