The Chilean leasing startup has been growing through bootstrapping since 2019, projecting to double its local presence this second half. The sector is promising, the figures say, but there is a cultural change that must occur first.
“You will possess nothing and you will be happy.”
The phrase was popularized during a meeting of the World Economic Forum (WEF) in Davos, around 2016, and is attributed to the Danish politician Ida Auken.
Although its intention has had bad press - since anti-globalists interpreted it as a desire by the WEF to restrict the right to have private property - the truth is that it was referring to the so-called "collaborative economy" or "platform economy": that future in which you don't buy a vacation home, but rent an Airbnb, you don't buy movies, you watch Netflix, you don't cook, you order Doordash, and endless business opportunities that are possible today thanks to to apps and electronic payment methods.
That is the concept behind SmartyCar's passenger and work vehicle rental service: rent for days, weeks or months, and make the payment more convenient than purchasing a car and all the expenses and procedures that entails.
“Smartycar is a spin-off of Salfa, a fairly large company in Chile. And it was born as a small MVP, or minimum viable product, within the machinery sales and rental business. But it has already become a company with its own direction,” Benjamin Salineros, CEO and founder of Smartycar, explains to AméricaEconomía.
He came up with the idea as an executive at Salfarent about five years ago. It was presented to the board of directors and received the company's approval almost immediately.
Based on the subscription rental model, recently launched in Latin America, the startup has two lines of business: one for individuals who hire vehicles of all types, and another for companies, aimed mainly at SMEs that need vehicles for work use. .
“In this sector we have agricultural, forestry companies, consultants and doctors,” details Salinero.
An important differentiator is that Smartycar's service is a medium to long-term rental model. It starts from 12 to 48 months, and includes all the services that you need to have in a car: insurance, driving license, tire change, replacement, home delivery and pick-up as well, to carry out maintenance.
“Unlike rent-a-car, or traditional leasing, our service seeks for the client to experience having their own car, but hiring it as a service. And that implies having both service convenience, which includes the benefits described, but also financial convenience, since vehicles lose value over time,” adds Salineros.
The company's goals for this second semester are ambitious: although today it has a presence in all the main cities of Chile, it hopes to reach 1,500 clients, also increasing its billing by 50%.
“This year we are growing in the business segment and also in the personal group. We are also growing in different product lines: traditional Smartycar, Smartycar Eco, which are electric and hybrid vehicles, Smartycar Black, which are high-end vehicles, and Smartycar Semi Nuevos, which is a line that has more flexible benefits, because it is a value 12% or 15% more convenient than a new vehicle, which you can hire for a period of one year and change it almost halfway through the contract,” lists the CEO.
RENTING AS A SERVICE
Although it is relatively new in Chile and Latin America, vehicle leasing was born more than a decade ago, with the 2008 crisis, and is very strong in Europe.
In Spain, for example, it represents over 25% of the vehicles sold monthly and today it is estimated that one in four vehicles registered each year in that country are already rented . It is also popular in Japan, where Toyota has Kinto mobility, which has already expanded around the globe.
“The great differentiation, and why we call it 'subscription', is because our business is based on technology and our clients are able to autonomously hire a vehicle, without anyone's assistance. You can hire the service in one hour and have the car at your home in three days,” details the CEO.
According to figures from the EMR consulting firm, Informes de Expertos, in 2023 the Latin American car rental market will reach an approximate value of US$8.62 billion. And it is estimated that the market will grow at a compound annual rate of 6.5% between 2024 and 2032, to reach a value of US$ 15.19 billion by 2032.
The reasons would be the increase in tourism, where the rental car rental industry for traveling short distances proliferates. There has also been considerable growth in business travel, which has led to an increase in demand for luxury executive vehicles, the consultancy says.
It is an additional business for automotive companies and there it is also understood why large brands along with startups have opted for the system: throughout Latin America there are already leasing firms that compete with Smartycar, such as Arval, a subsidiary of the BNP Paribas group, with a presence in Chile. , Colombia and Peru; the Chilean Awto, dependent on Kauffman, which operates in several cities in Chile and also in Brazil, where it also rents motorcycles.
In Argentina there is E-coche, an electric car rental platform; Europcar, originally from France, is the most widespread vehicle rental company throughout Latin America with offices in Argentina, Brazil, Chile, Mexico, Colombia, Uruguay, Bolivia, Dominican Republic, Jamaica, Costa Rica, Ecuador, French Guiana and Guatemala.
The aforementioned Kinto, which is Toyota's foray into carsharing , has been in Latin America since 2020. It landed in Argentina and Brazil first, and then expanded to Peru, Uruguay, Paraguay, Colombia and Chile.
The Brazilian company Localiza Rent a Car has a presence with more than 600 agencies distributed in seven countries: Argentina, Brazil, Colombia, Ecuador, Paraguay, Uruguay and Mexico. Mobilize, founded by the Renault group, has already been present in Latin America for 20 years. While in Colombia there is the Muverang company in the cities of Cali, Medellín and Bogotá, it has an exclusively electric fleet.
The difference with mobility applications is that Smartycar owns its fleet, which today is around 1,500 vehicles, for a majority of 1,200 clients.
And to have that entire fleet, the startup invested in an operations center in Santiago, which allows it to have all the logistical operations they need to be able to manage these cars, increasing the reach it has to meet needs throughout the country. and optimizing processes such as the preparation and delivery of units, as well as the coordination of services.
PARADIGM SHIFT
Despite the momentum and competition, Salineros knows he still has to deal with the most difficult factor to change, which is the mindset around cars.
“We are transforming the experience of owning a car to having the car as a service,” he emphasizes.
That is why it sees its business model as a long-term challenge. "Since it is quite a cultural transformation in the Chilean consumer, and probably in Latin America as well, to stop being the owner of things and have things as a service."
In any case, he sees the future with optimism, based on how his business started: “The first year we signed up 50 clients and it was 100% with the 'family and friends' formula. Our client was a consultant who had seen the model in Europe and found it interesting. Meanwhile, a friend hired a truck for himself and then hired another car for his wife and today he is already on his third vehicle with us, renewing it every two years,” recalls Salineros.
Today its clients are basically people between 35 and 40 years old, young clients who are opting for new mobility alternatives, who are looking for more flexibility and to adapt the cost of owning a car to their personal reality. “Instead of spending several million on a car, they prefer to have mobility as a cost, just as you have the cost of renting your house, or your cell phone,” he adds.
As in many other businesses, his was also boosted by the pandemic. "For two reasons. One, because there were no cars [for sale]. The second is because people began to understand that their car was sitting idle for a long time because they did not leave the house and the car was losing value,” specifies the CEO.
It was during the pandemic, too, when he turned Smartycar into a technology-based business, purchasing a technology platform to speed up the selection and hiring process from days to just minutes. “We had been making 20 to 25 monthly subscriptions manually and when we implemented the app we jumped to 60, 70 clients,” he adds.
Along with doubling the number of subscribers this 2024, there is still the challenge of them opting for cleaner emissions vehicles, with their Eco line.
"Given that we work with all the brands on the market and the advantage is that renting or subscription allows us to reduce the entry barriers to be able to experiment, because you do not own the vehicle, therefore, you do not have the uncertainty of the operation, the future value of that car, you also do not have to assume the high cost that electric or hybrid vehicles have today. 1% of our customers today prefer an electric or hybrid vehicle. But it is still difficult, there is a still slow preference for these cars” he concludes.
