As Lotte Rental, which owns Korea's No. 1 Lotte Rent-a-Car, is being sold to a global private equity fund (PEF), all major domestic rent-a-car corporations have ended up in the arms of PEFs. Analysts say global capital is rushing to secure rent-a-car businesses because they recognized their solid cash generation and future value. With the advent of the Autonomous Driving era, the car ownership paradigm is highly likely to shift to "rental," and rent-a-car corporations are expected to be reborn as forward bases for future mobility.
According to the rent-a-car industry on the 20th, Lotte Group recently signed a deal to sell a 61.2% equity stake in Lotte Rental to U.S. PEF Texas Pacific Group (TPG) for about 1.3105 trillion won. TPG was an early investor in U.S. ride-hailing corporation Uber and is currently the No. 2 shareholder of Kakao Mobility. Although TPG still needs Korea Fair Trade Commission approval for a business combination to complete the full acquisition of Lotte Rental, TPG has no rent-a-car business inside the group, so it is expected to pass smoothly.
A variety of corporations showed interest in the Lotte Rental acquisition race. Earlier, Hong Kong-based PEF Affinity Equity Partners attempted to acquire Lotte Rental, but the Korea Fair Trade Commission (FTC) blocked the business combination on the grounds that it already owns No. 2 player SK Rent-a-Car, scuttling the transaction. The holding company of Hankook Tire & Technology(161390), Hankook & Company(000240), also reviewed acquiring Lotte Rental. In addition, many other PEFs and corporations were said to have reviewed acquiring Lotte Rental.
Industry watchers say the reason Korea's No. 1 and No. 2 rent-a-car players—SK Rent-a-Car followed by Lotte Rental—have both landed in the arms of global PEFs is their strong profit generation capability. In the second quarter this year, Lotte Rental's operating profit on a consolidation basis was 84.6 billion won, up 9.6% from a year earlier, with an operating margin of 11.1%.
Shin Yun-cheol, an analyst at Kiwoom Securities, said, "Through continued growth in the high-margin used-car long-term rent-a-car segment, it will succeed in defending profitability," adding, "Lotte Rental has structurally secured an operating margin in the 11% range." SK Rent-a-Car also posted second-quarter operating profit of 51.0 billion won, up 50.7% from a year earlier.
Attention is also turning to the future value of the rent-a-car business. Park Kang-ho, an analyst at Daishin Securities, said, "With advances in information and communications technology and the growth of large-scale artificial intelligence (AI) agents, the automobile paradigm is shifting from ownership to rental, and as Autonomous Driving becomes standard, the rental market is expected to see sharp growth," adding, "Driving a car will become a choice, and the share of reliance on Autonomous Driving during trips is expected to gradually increase."
In other words, instead of buying a car, choosing according to purpose and time could highlight the efficiency of rental. Park emphasized, "In the short term, the meaning of rental—being able to choose the optimal time, desired model, and economic expense—will come to the fore." In addition, the ability to continuously collect data needed for AI training and service optimization—such as customers' personal information and vehicle operation data—also adds to the value of rental companies.
The fact that Lotte Rental has recently accelerated its push into overseas markets is another factor that will further raise corporate value. Lotte Rental partnered with Orix Rent-A-Car in Japan to enter the Okinawa short-term rent-a-car market, and, through an alliance with global rent-a-car corporation Hertz, began services in 63 cities across eight countries. An industry official said, "Know-how in operating overseas services and the data accumulated in the process can serve as powerful competitiveness in the future mobility market based on Autonomous Driving."