Automotive and transportation service provider PT Mitra Pinasthika Mustika Tbk (MPMX) has allocated IDR 100 billion (US$ 6.62 million) Capital expenditure (Capex) for digitalization program.

Established in 1987, the company was first founded by William Soeryadjaya who co-founded Astra conglomeration in 1957. MPM distributes Japanese car brands of Honda, Nissan and Datsun and motorcycles in East Java and East Nusa Tenggara. The company expands its business in car rental, oil lubricants manufacturing, general insurance and financing activities. It has 40 outlets and 280 dealers the two provinces. The company is a subsidiary of PT Saratoga Investama Sedaya Tbk (SRTG).

Strategic partnership

MPM would use 30% to 40% of its 2023 Capex for its digital initiative program, said the company's Group Corporate Communication & Sustainability General Manager Natalia Lusnita.

"The source of funds comes from internal cash flow and loan facilities from the third parties," she said on February 15, 2023, as quoted by kontan.co.id.

The 2023 Capex was lower than the 2022's since its subsidiary PT Mitra Pinasthika Mustika Rent was not included in the MPM's budget anymore.

Lusnita said the company has targeted a 15%-20% increase in revenue in 2023 from the car and motorcycle dealerships and retails.

"Seeing how the automotive industry has grown after the [COVID-19] pandemic, the company is confident that in 2023 our business will continue to have a positive trend. We are sure that all of our business segments will continue to grow," she said.

"We will take advantage of our network strength to improve the quality of service and distribution of all operational units. This step is expected to increase the trust of existing customers and attract new customers," she added .

MPM is optimistic that it can supply 700-750 units of vehicles, or 13%-14% of the total national sales, with an estimated sales increase of about 10%-15%. The national projection of motorcycle sales in 2023 is at 5.4 to 5.6 million units.

"Currently our focus is to strengthen the existing business line network," Lusnita said.

The company will also focus on digital transformation in the insurance segment. This step will be prioritized to smoothen the process of service to customers.

"We continue to strengthen our business portfolio and improve performance through strategic partnerships, as well as expanding cooperation with multi finance and banking," Lusnita explained.

As on the transportation segment, the company will target a 5% increase in the vehicles rental. The company will maintain 94%-95% availability of fleet.

MPM will also implement a digital initiative at the MPM Rent to increase the quality of service for B2B or B2C customers. The company is also currently developing short-term rent under one month for B2B and B2C clients with special units which includes chauffeur service.

Risks in car rental industry

Taking advantage of the local market, the rise of ride-sharing has threatened the industry to take a considerable amount of car rental industry's market growth and revenue. This makes the car rental industry suffer greatly from this competition.

The increasing use of digital methods in marketing, car rental industry might not be able to catch up other players if they do not go digital or make online booking more user-friendly or cooperate with the more flexible ride-hailing industry.