Thailand motorcycle rental business analysis

[KTMphil]

Had a quick look at the economics of a Chiang Mai motorcycle rental business model, looking at which motorcycles makes sense to rent.


Some simple assumptions of the rental motorcycle being bought new and sold with 50-60k km's on it as a rental motorcycle, so re-sale not top dollar.

This is a "gross" rental return analysis, doesnt allow for tires, oil, brake pads and other consumables. As they all have this, its almost a constant with Thai assembled and domestically sold bikes.

I added the deprecation back to the purchase price, then divided by the high season rental rate, to get to the return/ how many days rental to get the money back. (Added the depreciation back on, as if you could sell a certain model for the same you bought it for it would materially differ the return from say an ER6 which trade horribly second hand).

mc rental analysis by Triangle Golden 007, on Flickr


AS you can see the ER6 shows the best return, so the resale est. maybe too high. The Versys shows a return if you could sell it for over 200,000 bht with 50,000km at 237 days return.

 

[brake034]

Phil,

In my opinion you should take the cost price of the bike, deduct the depreciation so you get the actual costs, divide that by the daily rental charge and you know the amount of rental days to break even?!

Your table should look like this in my opinion:

Motorcycle	Costs	Depreciation	C MINUS D	Day rent	C-D/rental rate
					in days
Suzuki Vstrom 650	385,000	115,000	270,000	1,900	142
Honda CB650F	285,000	90,000	195,000	1,500	130
Honda CB500X	220,000	80,000	140,000	1,200	117
Kawasaki Versys 650	313,000	90,000	223,000	1,700	131
Honda CRF250L	138,000	65,000	73,000	800	91
Honda CB300F	140,000	60,000	80,000	800	100
Triumph Bonneville	420,000	100,000	320,000	2,000	160
Kawasaki Z800	375,000	120,000	255,000	1,900	134
Kawasaki ER6 650	275,000	100,000	175,000	1,600	109

 

[KTMphil]

Marcel, I did think about doing it that way but i dont think it reflects correct results. You dont get the "actual cost".

ie:

I spend 385,000 bht on a new Suzuki V Strom. That's my cash outlay i need to know how many days to get that investment back. By deducting the depreciation, you create an unrealistic return as you've adjusted your cash outlay down & not allowed for the cash you've lost on the sale of the bike. The more it depreciates under your method the more attractive the investment looks, so cant be right?


If I buy an Honda XR 250 for 75,000 Bht rent it for 700 Bht a day and sell it for 50,000 Bht. Doesn't give the same return as buying a Honda XR 250 for 50,000 Bht, renting it for 700 Bht a day and selling it for 50,000 Bht (what i paid for it)?

 

[brake034]

In fact you need to consider what you write off in your bookkeeping versus reality, the actual sales prices of the second hand bike.
Ideally the depreciation in your bookkeeping should be higher that the actual second hand value.
The depreciation can be deducted from taxes and the higher second hand sales value can be booked as a "profit".

Actually the thing to do is to divide the (cosmetically high) depreciation value by the daily rental rate to calculate your minimum amount of rental days to "break even"

Motorcycle	Costs	Depreciation	C MINUS D	Day rent	C-D/rental rate	Depreciation /
					in days	day rent
Suzuki Vstrom 650	385,000	115,000	270,000	1,900	142	61
Honda CB650F	285,000	90,000	195,000	1,500	130	60
Honda CB500X	220,000	80,000	140,000	1,200	117	67
Kawasaki Versys 650	313,000	90,000	223,000	1,700	131	53
Honda CRF250L	138,000	65,000	73,000	800	91	81
Honda CB300F	140,000	60,000	80,000	800	100	75
Triumph Bonneville	420,000	100,000	320,000	2,000	160	50
Kawasaki Z800	375,000	120,000	255,000	1,900	134	63
Kawasaki ER6 650	275,000	100,000	175,000	1,600	109	63

 

[KTMphil]

Suzuki V Strom 650


Cash flow analysis:

Cost 385,000 / 1, 900 Bht a day = 202 days

Depreciation (cash lost) 115,000 / 1,900 = 61 days


Add the two -- 263 days as per my spreadsheet.

 

[brake034]

So you take the purchase price, add depreciation and write it off fully?

 

[KTMphil]

So you take the purchase price, add depreciation and write it off fully?

Because you are "rolling" the motorcycle investment into the new purchase ( & have less cash to invest in the new bike) I think you have to and you have to allow for the cash you have lost on the sale? The number of days to rent on purchase price gives a relative rate of return on your money invested.

 

[brake034]

Maybe easier to discuss by phone the next few days?

 

[TB-Racing]

Well ~ here is a chance to use them bike rental business calculations wisely = http://advrider.com/index.php?threa...ur-company-for-sale-–-owner-retiring.1154178/

 

[Maoser]

Wouldn't 2 years of 1st Class Insurance also need to be added to each bike.

 

[KTMphil]

Wouldn't 2 years of 1st Class Insurance also need to be added to each bike.

Most bikes are rented only with liability insurance, you bend it, you own it.

 

[brake034]

It is extremely difficult, if not impossible, to get 1st class insurance for big bike rental purpose.
I know of one company only who committed to cover 500cc bikes for rentals but that plan never materialised so I am not sure how real their commitment was.