Sheikh Abdullatif Alissa
CEO of Alissa Automotive Group
Saudis have something with cars. Their cities are designed on car-friendly grids; fuel is a cheap, highway plentiful, wide and in good condition. There is virtually no public transport in the cities and the railway network is only beginning to be expanded beyond the lone Riyadh-Damman line. Some of the favourite pastimes of young Saudis seem to be rallying daddy's SUV across desert dunes or sandal surfing next to it on the kingdom's immaculate highways. In short, Sheikh Abdul Latif Alissa was only exceptional in this respect that he made the automotive sector his business too – and for being one of the first to get into that business. He began his commercial career in the early 1940s as a marketer of General Motors vehicles, but his GM dealership proved to be just the first step in what was to become the Alissa Automotive Group, an empire which progressively grew to include the Autostar used car sales company, the Al Yusr Instalment Company, leasing and financing customers' purchases, and Best Car Rental, one of the leading car rental companies in the Kingdom. Saudi Arabia's total car rental market currently amounts to a fleet of 150,000 vehicles and is dominated by ten major players.
The company now stands in the second position in the Saudi market, with corporate customers such as Saudi Aramco, the Arabian Oil Company, SABIC and Consolidated Contractors Co. Only six years ago, the company was running a 6% loss, now it is well on the way to making a 12% annual profit – or some 2% bottom line growth year-on-year.
The original company was rather small, with a total fleet of just 2,500 cars. In Q1 of 2010, the company had 10,500 cars driving around the kingdom. 550 employees in 26 offices ensure its service countrywide. Some 30% of the company's business consists of daily renting, as compared to 70% long-term leasing. That is almost the exact opposite to what you find in the UK and the US, where daily rental to individuals – whether locals or tourists – takes up the lion's share, while leasing to corporate clients is less important. In Saudi Arabia we don't have many individuals or families coming as independent holidaymakers. On the other hand, the intensifying economic development of the country means many companies are active here, most of which work with expats whom they have to provide with cars.
Another difference between the car rental business in the US and in KSA is the high incidence of car damage and loss, both because driving habits are more careless and enforcement of traffic rules rather lax, and because – especially in the early years – customers making off with rental cars was not uncommon. Best used to lose some 20% of its fleet that way, although law enforcement has improved in the meantime – now the figure has come down to 3%. The legal and bureaucratic situation in general has improved considerably, enabling rental companies to register leasing and rental customers online in a governmental database, and have traffic fines and damage through accidents charged directly to the customer without having to first pay as a company and then charge it to the customer, as in the past.
The strategy that propelled Best Car Rental to second position in the market was providing superior service to corporate clients. For leasing contracts involving 50 cars or above, Best appoints a dedicated agent to service the cars and deal with that particular client full-time – including not only maintenance but also taking care of the filing of accident reports and other small hassles clients prefer not to deal with themselves. Best also has a policy of selling the cars after maximum one year, ensuring clients only get high-quality vehicles of the latest model, while keeping maintenance cost and risk of mechanical failure low. This moreover allows it to play into the prevailing trends in the used car market. Currently, Toyota is the brand most in demand in second-hand sales.
The 400% increase in fleet volume in a mere seven years gives a good indication of the expansion of the kingdom's general economy - in the same period, the total fleet of car rentals has been skyrocketing. However, still there is room for further growth though. New companies keep starting up, foreign investors are moving into the market, new dealerships are springing up everywhere, and there is obviously still unsatisfied demand. The plan of Best for the near future is to increase the market share from 19% to 25% – partly by expanding into the few areas in the country, such as Ha'il and Jizan, where it has no presence yet, but also considering the acquisition of other, smaller companies. In the midterm, Best is looking to expand into other GCC countries – Bahrain, the UAE, Kuwait... But their ultimate goal is to become number one in the entire MENA region, which means expanding our fleet to around 20,000 cars.
Our latest investment report on Kuwait was recently published in one of the leading Spanish dailies, ABC. FindMe in Kuwait explores the economic perspectives of Kuwait and the country´s future plans to compete with its fast developing neighbours. Once the leading country of the Gulf, Kuwait has remained silent for the past decade. And although many would like to see faster changes, Kuwait is moving, at its pace, to them. Inexorably. Learn about who is who in Kuwait and read what the leaders say about their own future in our upcoming release: FindMe in Kuwait Mobile app.
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