Renting a car is becoming impossible

Renting a car is becoming impossible

Three days in June around the streets of Rome with a rented Fiat 500: 265 euros. An SUV for a long weekend in Orlando in July: 436 euros. A family with automatic transmission to visit the Algarve for a week in August: 810 euros. The cost, however, is not the only problem: for some tourist destinations there are no rental cars.

What happened? The pandemic, the microchip crisis and the war in Ukraine, to begin with. But it's not just a short-term jolt - the rental car market could change forever. The consequence could be a permanent increase in prices, an influx of electric cars, the arrival of Chinese brands on the market, and perhaps the rise of peer-to-peer car sharing as a mainstream alternative, in case a sufficient number of people show willingness to share their cars with strangers.

The crisis in the industry The situation began to take a turn for the worse in early 2020, when lockdowns around the world brought down the automotive market. 'car rental . Nearly two-thirds of Avis-Budget's car rental businesses at airports have closed, with company-wide revenue declining 41 percent from the previous year in 2020. For Europcar, 2020 revenue fell 42 percent ; in the case of Hertz - which then filed for bankruptcy before restructuring and recovering - the decline was 46 percent.

In response to the disruption in the industry, rental companies have sold their cars. In the UK, fleets have been reduced by 30 per cent, according to the British Vehicle Rental and Leasing Association (BVRLA), a British industry association. In 2019, Hertz had 700,000 vehicles globally. In the first quarter of 2022, its fleet dropped to 481,000 units, according to a company spokesperson. Europcar's fleet numbered 293,000 vehicles in the first quarter of 2020, then reduced to 187,200 in 2021.

WiredLeaks, how to send us an anonymous report The strategy made sense, considering that the two key markets of the sector, that of businesses and people on vacation were confined to home, explains Yusuf Allinson, an analyst at the market research firm IbisWorld: "It made no sense to keep assets that were devaluing and not generating money".

But when the lockdowns were eased and travel began to resume, however, car rental companies were unable to stock up on vehicles due to a shortage of chips that stalled production, a problem compounded by the complexity of car chains. procurement based on components manufactured or assembled in Ukraine. The resulting shortage of rental cars has led to prices to more than double. According to consumer organization Which, car rental costs increased by an average of 135 percent in Portugal, Cyprus, Spain, Greece, Italy and France over the Easter period from 2019 levels. at a higher price, fuel costs more, there is more demand: it is logical for prices to rise ", Allinson points out.

Peer-to-peer car sharing There is not much you can do can do about it. But if you want to avoid dizzying quotes or don't want to find yourself without a car for your family holidays, then it's best to book well in advance. Those used to making last-minute plans may not find this advice particularly useful, but there is another option: car-sharing platforms that allow individuals to rent their vehicles. Services like Turo, Getaround, or HiyaCar could fill the void left by car rental fleets and help car owners struggling with high fuel costs. HiyaCar recorded 220 percent growth in bookings over last year, while car owners' earnings increased tenfold on Turo.

Peer-to-peer car sharing platforms function like an Airbnb of car. Unlike Airbnb, which currently has a valuation of $ 78.8 billion, the private car sharing sector has not yet taken off, despite the fact that cars remain idle 96% of the time. But now, thanks to the difficulties and other prices of traditional car rentals, the industry's time may finally have come.

According to Xavier Collins, Turo's vice president, convenience is another benefit of peer-to-peer car sharing. to-peer: many people can find a car within walking distance without having to go to a rental point on the edge of town. For those who are already in the city it is certainly an advantage, but what happens to those who arrive by plane from outside for a holiday? UK-based HiyaCar is currently focusing on local renters rather than tourists (but hopes to be able to add a dedicated visitor service this year), while the other two companies cater to travelers. Getaround is trying to get parking spaces for its cars in transport hub parking lots; in France, for example, the company has dedicated seats near railway stations.

Turo has gone even further. The company's cars are delivered directly to the arrivals area of ​​the airports and the owner meets the renters with the keys or leaves the vehicle in the airport parking lot, where it can be unlocked via the app.

Platforms like Turo, Getaround and HiyaCar offer the same advantage as Airbnb and other companies of the so-called sharing economy: "The cars on the platforms do not belong to the company - explains Even Heggernes, vice president of Getaround Europe -. The shortage of cars that is occurring everywhere is not a which really concerns us ".

However, this does not mean that platforms do not have to deal with the shortage of vehicles anyway: in the United Kingdom, HiyaCar has two thousand cars for its 150 thousand registered users. Turo has three thousand in the United Kingdom, while in the United States Getaround can count on 160 thousand vehicles. Sharing platforms are based on the willingness of individuals to let strangers travel with their car, something that requires trust and commitment to keep vehicles clean, full and ready to rent. It's a demanding request, although Heggernes, whose main job is to encourage drivers to sign up for the platform, says the supply has increased due to rising cost of living, which has prompted people to seek alternative ways to earn. a little more money.

HiyaCar also offers a solution to the continuing lack of supply: filling the system with your own vehicles. Against 150 thousand registered users, HiyaCar has only two thousand cars, 350 of which are part of its “car club” system. These are not vehicles owned by HiyaCar, but car manufacturers, which are guaranteed a minimum income: the goal is to add cars where there is not enough supply yet.

"There it's a lot of demand but not enough cars - explains Rob Lamour, co-founder of HiyaCar -. You can't drive into an area and have a lot of cars to rent out of nowhere; it takes time to build [the fleet, ed.] ". Car clubs are also created in areas where there are generally not enough vehicles, such as central London, where public transport may have reduced the number of car owners, but the demand for ad hoc rentals remains. high.

Car rental countermeasures For their part, traditional car rental companies seem unwilling to let newcomers disrupt their market. Even before the pandemic, car rental companies were lobbying for the peer-to-peer market to be more strictly regulated, calling for stricter vehicle controls and restrictions on drop off zones at airports.

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Arrow Now, companies are working to rapidly increase their fleets: "Currently, our global fleet is almost back to pre-existing levels. -crisis, ”says Tim Vetters, managing director of Sixt UK. But as buying cars is still difficult, the company has begun to tap into a larger pool of manufacturers and keep cars in fleets longer.

Hertz 'latest annual report shows that the The average period of stay of a vehicle reached 25 months in the American continent, an all-time high, and 20 months in the rest of the world, compared to 18 months in the continent and 12 internationally in 2019. Europcar's latest quarterly results highlight how the company is turning to Asian auto makers and electric vehicles to fill gaps in its fleet.

Strategies are working, albeit slowly. After the collapse in the early years of the pandemic, the car fleets of car rental companies began to repopulate. Profits are also picking up, despite some US policymakers expressing concern over a possible predatory pricing application, with Hertz posting record quarterly profit after restructuring.

The future of the industry Even without the app and the upheavals introduced by peer-to-peer car sharing, the car shortage could result in a long-term transformation in the car rental market, meaning prices are likely to remain high. There is a reason for this: the industry was previously able to keep prices low in part because automakers produced too many vehicles, says Toby Poston, director of corporate affairs at BVRL. Rental companies either bought the excess vehicles in bulk and at discounted prices, resold them once their "career" as a rental car ended, or they entered into buy-back programs with manufacturers, which planned to use a car for a short time beforehand. to return it.

Both of these strategies have favored car rental companies, but the current shortage means that manufacturers have now taken over and are no longer forced to sell vehicles at a loss. This factor, combined with fuel price inflation, leads car, and hence rental, prices to remain high.

It remains to be seen whether this will give peer-to-peer car sharing companies the possibility of disrupting the market. If they do, they probably won't just hit the revenue of Avis-Budget and Hertz - they could change the concept of car ownership. While not enough new cars are being produced at the moment, there is actually no shortage of cars - we have more than we need, which remain parked and underused. In the UK, for example, there are 40 million vehicles on the road; in the United States there are 276 million. Now that car rental companies' fleets have declined by hundreds of thousands, the difference could be offset by cars parked on roadsides and parked in garages.

This article originally appeared on UK .

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