The Car Rental Industry

12 Jul 2018 13:20
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Market Overview

The car rental industry is a multi-billion dollar industry of the US market. The US section of this industry averages roughly $18.5 billion in revenue per year. Today, there are roughly 1.9 million rental vehicles that service the US segment of the marketplace. Additionally, there are many rental agencies besides the industry leaders that subdivide the entire earnings, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service businesses, the rental car industry is highly consolidated which obviously puts potential new comers at a cost-disadvantage because they face high input prices with decreased possibility of economies of scale. Moreover, the majority of the gain is made by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise made $7.4 billion in earnings.

Level of Integration

The rental car industry faces a completely different environment than it did five years back. According to Business Travel News, vehicles are being rented until they have gathered 20,000 to 30,000 miles until they are relegated to the used car industry whereas the turn-around mileage was 12,000 to 15,000 miles five years ago. Because of slow business growth and narrow profit margin, there is no imminent threat to backward integration within the industry. In fact, one of the industry players only Hertz is vertically integrated through Ford.

Scope of Competition

There are lots of factors that form the competitive landscape of the car rental industry. Competition comes from two chief sources throughout the chain. On the holiday consumer's end of the spectrum, competition is fierce not simply because the market is saturated and well guarded by industry leader Enterprise, but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. Since the business underwent a huge financial downturn lately, it has upgraded the scale of competition within the majority of the companies which survived. Competitively speaking, the rental car market is a war-zone as many rental agencies such as Enterprise, Hertz and Avis among the major players engage in a battle of the fittest.

Growth

Within the past five decades, most companies are working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise now the firm with the largest fleet in america has additional 75,000 vehicles to its fleet since 2002 which help raise its number of facilities 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. Over the years after the economic downturn, although most companies across the industry were struggling, Enterprise one of the industry leaders had been growing steadily. Since Exotic Car Rental Ohio , the industry has started to recover its footing in the sector as overall earnings grew from $17.9 billion to $18.2 billion in 2003. According to industry analysts, the better days of the rental car sector have yet to come. Over the course of the next several decades, the industry is expected to undergo rapid growth valued at $20.89 billion annually after 2008"that equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.

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