Lotte Rental revealed its consolidated financial results for Q3 2023, announcing sales of 687.3 billion won, operating profit of 81.4 billion won, and net income of 39.7 billion won. This marks the highest net income in the company’s history for the third quarter, continuing a trend of operating profits exceeding 80 billion won since the first quarter.

Earlier in June, Lotte Rental announced long-term business goals and new growth strategies. Key strategies include expanding the portfolio of long-term used car rentals and commercial vehicle services, as well as improving profitability through accident risk management and customer retention.

In alignment with the new growth strategies, the company focused on improving its core rental business in the third quarter.

To expand its used car service portfolio, Lotte Rental launched the used car rental service ‘Lotte Rent-a-Car My Car Save’. ‘Lotte Rent-a-Car My Car Save’ aims to tap into the used car market by leveraging a stable supply of vehicles from Lotte Rental’s fleet of 260,000 cars, ensuring reliable vehicle quality.

Preliminary work to strengthen commercial vehicle leasing has also been completed. In August, they launched EV commercial vehicle maintenance products and entered into an MOU to expand their electric vehicle lineup, including the rollout of small electric cargo vans and an online product page revamp for ‘Lotte Auto Lease’.

The company has also actively engaged in activities to reduce accident and compensation costs in order to improve existing business profit models. They developed an ‘Underwriting Model’ prior to contracts and established an ‘Accident Prevention Process’ during contracts, successfully reducing accident risk costs— which account for about 30% of total costs excluding vehicle purchases—by 10.5% (61 billion won) compared to the same period last year. Lotte Rental aims to reduce accident-related costs by 7% annually.

Moreover, they have strengthened retention contracts (extensions/recontracts) for profitable B2C customers. The ROA for retention contracts stands at 12.4%, nearly four times higher than the ROA of 3.1% for new contracts. Since the second quarter, Lotte Rental has intensified sales activities for retention, increasing the renewal rate from 12.7% in the first quarter to 29.9% in the third quarter.

Revenue from used car exports saw a remarkable 35.6% increase, with cumulative earnings reaching 54.8 billion won by Q3 2023, compared to 40.4 billion won in the same period of 2022. The export market is expected to experience explosive growth, expanding from 3.6 trillion won in 2022 to an estimated 6 trillion won in 2023, with Lotte Rental planning to intensify its focus on this core business sector, currently holding a mere 1.3% market share. To support this growth, they are improving the export organization, introducing an online auction system, and enhancing sales channels/methods for local buyers in the Middle East.

In November, Lotte Rental revamped its branding from the previous ‘New Car Franchise’ to ‘Lotte Rent-a-Car My Car’, ‘Lotte Rent-a-Car Biz Car’, etc., tailored to customer and service characteristics. They have launched the ‘My Car Membership Plus’ program to prioritize customer relationships, aiming to attract new customers while also providing a more enjoyable car life for existing customers with enhanced services and benefits.

Additionally, Lotte Rental has improved its asset and financial health indicators in Q3, reducing its debt ratio from 408% in Q2 to 395%, marking an improvement of about 13 percentage points. The bad debt ratio, indicating asset quality, has been managed to a low of 0.12%, decreasing by 0.03 percentage points compared to Q2. These indicators outperform those of leading domestic capital companies, and strengthened management across all business divisions has led to improved asset quality for Lotte Rental.

Lotte Rental CEO Choi Jin-hwan stated, “We are undergoing restructuring in line with our new growth strategy,” and emphasized, “Through a complete brand overhaul and innovative services, we aim to strengthen our relationship with customers while achieving top-level growth in new business areas and sustainability.”

Please contact Lee Sang-jin at daedusj@aurodiary.kr