The Car Rental Industry

12 Jul 2018 13:14
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Market Overview

The vehicle rental market is a multi-billion dollar sector of the US market. The US section of the industry averages about $18.5 billion in revenue a year. Nowadays, there are approximately 1.9 million rental vehicles that support the US section of this market. In addition, there are lots of rental agencies aside from the industry leaders who subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car market is highly consolidated which obviously puts potential new comers at a cost-disadvantage since they confront high input costs with reduced possibility of economies of scale. Moreover, most of the profit is made by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in earnings.

Level of Integration

According to Business Travel News, vehicles have been leased till they have gathered 20,000 to 30,000 miles until they are relegated to the used car sector whereas the turn-around mileage was 12,000 to 15,000 kilometers five years ago. Because of slow industry growth and narrow profit margin, there's not any impending threat to backward integration inside the industry. In fact, among the industry players just Hertz is vertically integrated through Ford.

Scope of Competition

There are lots of elements that shape the competitive landscape of the auto rental industry. Competition comes from two chief sources throughout the series. On the vacation customer's end of the spectrum, competition is fierce not simply because the market is saturated and well guarded by industry pioneer Enterprise, but opponents operate at a price disadvantage along with smaller market shares since Enterprise has created a network of traders over 90% the leisure section. On Luxury Car Rental Ohio , on the other hand, competition is quite strong at the airports since that section is under tight supervision by Hertz. Since the business underwent a massive financial downfall lately, it has upgraded the scale of competition within the majority of the companies that survived. Competitively speaking, the rental vehicle market is a war-zone as many rental agencies including Enterprise, Hertz and Avis one of the significant players participate in a battle of the fittest.

Growth

Within the previous five decades, most companies are working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise currently the firm with the biggest fleet in america has added 75,000 vehicles to its fleet since 2002 that help increase its number of amenities to 170 in the airports. Hertz, on the other hand, has additional 25,000 vehicles and broadened its international presence in 150 counties as opposed to 140 in 2002. In addition, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent financial adversities. Over the years following the economic downturn, though most companies across the sector were struggling, Enterprise among the industry leaders had been growing steadily. For example, annual sales reached $6.3 in 2001, $6.5 in 2002, $6.9 in 2003 and $7.4 billion in 2004 which translated into a growth rate of 7.2 per cent annually for the past four decades. Since 2002, the business has begun to recover its footing in the industry as total sales grew from $17.9 billion to $18.2 billion in 2003. According to business analysts, the better days of the rental car sector have yet to come. Over the course of the upcoming several years, the industry is expected to experience accelerated growth appreciated at $20.89 billion each year following 2008"which equates to a CAGR of 2.7 percent [increase] in the 2003-2008 period.

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