At the beginning of the month, the Domicar car-hire
firm notified the Tel-Aviv Stock Exchange (TASE) it had
obtained a car-hire franchise from the International
Budget company of Austria. The European concession,
first of its kind to be granted to an Israeli company,
forms part of an accelerated business and marketing
development process presently being undergone by Israeli
car-hire companies.
The lowering of the threshold of penetration into the
Israeli leasing industry has brought by dozens of small
companies into the market, heightening competitive
pressure on the major, long-standing firms. The latter
have accordingly started seeking additional fields in
which to make best use of their advantages: a big
vehicle fleet, a nation-wide network of branches and a
complex and expensive logistics infrastructure for
servicing and handling motor vehicles.
One of the most significant changes apparent today is
the expansion of activity connected with the sale of used
motor-vehicles. Most car-hire companies, in fact, do not
welcome the chance to specify the proportion assigned
to this activity out of total business; but it is a
respectable share.
The economic logic is clear: the leasing companies
that acquire hundreds of motor vehicles annually, are
preferred customers among motor vehicle importers. As
such, they get significant discounts off the official
price-list, on purchasing new vehicles. Accordingly, the
sale of a private car that has been on hire for mot
more than a few months, at a price approximating
"catalogue price", yields a nice profit.
On the face of it, the motor vehicle sales business
should be very attractive. But things are not so simple:
the selling company, being dependent on Israel's used car
market price-lists, is increasingly exposed to business
risk. Even the new regulation giving vehicle importers
the freedom to determine when the new model will take
effect, is going to make things difficult for the
companies this year.
Moreover, wherever the leasing company is owned or
controlled by the motor vehicle importer, the whole
affair is even more complicated. Sources in the industry
allege that some importers regard the leasing company
owned by them as a sort of "receptacle" for dead stocks
of vehicles for which there is no demand. The problem is
that in order to obtain a good price when selling the
used vehicles, the leasing company must stock up on
highly sought-after models. It therefore sustains
significant losses when forced to accept models with a
steep decline in value.