South Korea’s car rental companies saw auto transport industry’s main green fuel shift

Strong points

SK rent-a-car adds 4,200 electric vehicles to its fleet in 2021

Rental companies are expected to absorb more than 8% of total green vehicle sales by 2025

Refiners expect demand for gasoline to continue to decline, but exports are stable

Car rental companies are expected to play an important role in shifting the South Korean automotive transport sector’s fuel from gasoline and diesel to greener power, with SK rent-a-car and Lotte Rental taking up a significant share in the country’s annual electric vehicle sales, industry and market participants said Dec. 10.

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Lotte Rental purchased 8,000 electric vehicles in 2020, representing about 4% of total electric vehicle sales in South Korea for the year, a company official said. The country’s largest car rental company by fleet is expected to have added around 10,000 electric and hydrogen vehicles in 2021.

South Korea’s second-largest car rental company, SK rent-a-car, said it bought around 4,200 electric vehicles in 2021 and expected to absorb a much larger portion of the country’s total green vehicle sales over the next few years.

SK rent-a-car first issued “corporate green bonds” earlier this year with the aim of raising capital only for investments in green and environmentally friendly vehicles, said the company in an ESG press release, and is rapidly increasing the share of green vehicles in its overall fleet.

The company also plans to set up an electric vehicle rental center at its Jeju branch, which is said to be the country’s largest electric vehicle-themed site.

South Korea’s leading car rental companies combined are expected to lead the fuel shift in the auto transport industry by purchasing more than 8% of the country’s total green vehicle sales by 2025, according to marketing sources from leading companies in South Korea. location and market analysts interviewed by S&P Global Platts. .

Long-term rental packages are very popular in large cities, and green vehicles run by major rental companies are said to provide many consumers with an affordable experience in electric and hydrogen cars, automotive analysts at Hanwha Investment say. & Securities and Kiwoom Securities. based in Seoul.

South Korea’s demand for gasoline and diesel will inevitably tend to decline, as the share of green vehicles is set to exceed 10% of the total number of cars registered in the country in the next 3-5 years. years, up from 4.2 percent now, according to diesel marketing officials at three major South Korean refiners. The country has a total of 2.436 million vehicles registered and active on the road, according to data from the Ministry of Land, Infrastructure and Transport.

The country’s second largest refiner, GS Caltex, has been working with Lotte Rental since the third quarter of 2020 to provide a variety of next-generation charging services at its gas stations. GS Caltex operates around 40 charging stations with 46 fast charging stations.

South Korea consumed 206 million barrels of gasoline and diesel in the first 10 months of the year, up 3% from 200 million barrels in the same period a year earlier and down 1.9% from 210 million barrels from January to October 2019, the latest data from Korea National Oil Corp.

While increasing sales of electric and hydrogen vehicles in Asia’s fourth-largest oil consumer will likely lead to a steady decline in domestic gasoline and diesel consumption over the next decade, major refiners, including SK Innovation and S-Oil, have indicated that automotive fuel production may not necessarily drop sharply from expectations of stable exports, particularly to Southeast Asia, middle distillate traders said. refiners.

“The speed of the energy transition and fuel switch will take longer for less developed economies and average consumers in these markets would have less purchasing power for new green fuels,” said a middle distillate distributor at S-Oil. “South Korea will continue to be a reliable supplier of liquid fuel to consumers across Southeast Asia for at least a decade.”

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