Car rental companies need to embrace, rather than resist, the change that is happening in today’s new mobility market. There are many opportunities for car rental companies to better service the changing needs of consumers, from service bundling to offering an automated rental process.
A few decades ago, car rental companies were the only solution to people’s need to access a vehicle without owning one. They enabled people to make road trips or weekday errands, while also giving visitors a way to explore the area. Fast forward to today, and people are given more options to meet their mobility needs. Nonetheless, car rental companies have a wealth of experience under their belt, and it is key to leverage that experience in order to stay relevant to today’s consumers.
The Competitive Landscape
With the rise of new mobility options like peer-to-peer carsharing and ride-hailing companies, car rental companies have been impacted with even more competition. Organizations like the American Car Rental Association are in a continuous battle to keep regulations in favor of their members’ interests. Otherwise, there is fear that car rental companies will cease to exist. This is a prime example of how traditional companies need to stay nimble and adapt to change in order to stay competitive.
Fortunately, the car rental giants have an understanding of the need to change, and many have programs in place to get ready for technology-enabled mobility.
With over 1 million vehicles in 4,650 locations, Enterprise has a large global footprint. In 2005, Enterprise began its journey in carsharing, and continued to grow Enterprise CarShare through acquisitions and organic growth. With these ventures, plus new ones like their mobility-as-a-service program, Enterprise is able to give people on-demand vehicle access in parallel with their traditional car rental service.
Enterprise also knows the key to success is to continuously test new products and services in the market. They are partnered with General Motors to test connected, telematics-enabled vehicles to improve their tracking, diagnostics, and remote access. Even more interesting is their partnership with Voyage to gain fleet management experience with autonomous vehicles.
Sixt is the oldest car rental operator, being established since 1912. They have a strong presence, mainly focused in the European market with over 225,000 vehicles in approximately 4,000 locations. Sixt was originally involved with BMW’s carsharing venture, DriveNow, but was bought out in 2018. Since then, Sixt has planned and executed their own carsharing service in Germany – Sixt Share. Within the app, users can access both the carsharing vehicles and traditional car rental vehicles, plus their ride-hailing feature as well, providing additional flexibility to customers.
In addition to these ventures, Sixt recently invested in Chargery, a mobile electric car charging company. This allows Sixt to more easily charge their electric vehicles in their carsharing fleet in Berlin. Most recently, Sixt also launched Sixt Unlimited, MaaS by Sixt, along with Sixt Mobility Club for better mobility choices.
Avis Budget Group
Avis Budget Group formed in 2006 and became a united brand globally in 2011. They have a fairly strong presence in the shared mobility space, most notably with its acquisition of Zipcar, one of the original station-based carsharing companies operating in the United States. As a result of this acquisition, Avis Budget Group has been able to leverage its learnings from managing Zipcar and to improve its customers’ app experience on the car rental side.
In 2016, Avis partnered with Didi, a ride-hailing service in China to provide Chinese tourists an easy way to rent vehicles during their travels. In addition, Avis is a fleet management company for Waymo’s fleet of autonomous vehicles and serves a similar capacity for ride-pooling company ViaVan in London, while also providing them with eight-seat passenger vans. They have also joined Lyft’s Express Drive program, allowing drivers to rent Avis’ vehicles.
Europcar has a strong global footprint, with 190,000 vehicles spread over 140 countries in Europe, North America, Asia, and Africa. In 2015, Europcar acquired carsharing company Ubeeqo, which was followed by an expansion of their mobility portfolio with the acquisition of Bluemove and GoCar in 2016, and most recently the acquisition of Scooty, a scooter sharing service.
These acquisitions make Europcar an experienced car rental operator in the carsharing and scooter sharing industries. As a result, they get a first-hand understanding on the changing demands of consumer preferences. In order to better prepare for these changes, last year Europcar reshifted their focus on Europcar Mobility Group, and joined the Mobility-as-a-Service Alliance.
Hertz is another American-based car rental operation, with 616,000 vehicles in over 3,700 locations. While their involvement in shared mobility is less compared to competitors, they do offer rentals to Uber drivers and they have partnered with Aptiv, an autonomous vehicle company, to manage their fleet.
In addition, Hertz offers Hertz 24/7, a program available across UK and Europe for automated rentals. They originally offered this service in North America as well, but it only lasted two years due to low demand.
Understanding Market Advantages
Success in the car rental market is pretty well defined and understood by operators. What’s important to note, however, is that these successes aren’t specific to just this market. Instead, these same success factors can be applied to new business models that could even better serve the needs of customers – for example carsharing or automated rentals.
Balancing pricing and vehicle availability is the sole focus for car rental operators. Demand in the summer months versus winter months makes a difference when it comes to pricing, and operators work hard to set the right price to maintain a high vehicle utilization. This practice is key to running a sustainable business.
In the shared mobility space, utilization is still key. The only difference is, because of the 24/7 nature of carsharing or automated rentals, utilization is measured per hour, making it an even tougher challenge to achieve high utilization.
The pick-up and drop-off location is a key part in making car rental convenient. In many cases, this represents airports and city centers, with other locations scattered throughout the city. Car rental companies know how to choose profitable locations. However, if the constraint of a physical storefront was removed, there could be even more possibilities at being closer to the customer.
Even if 5-10 vehicles could be offered through counter-less key dispatch, car rental operators have an opportunity to offer their service in more locations. By focusing on seamless reservation and customer validation processes online, operators can offer self-serve car rentals closer to where customers are. As a result, customers can manage the reservation at their convenience, and only have to deal with getting vehicle keys as the last process.
Similarly, the process of renting a car hasn’t changed much over the years. From company to company, users have to wait in line, speak with a rep, fill out forms, do a vehicle inspection, and finally get the vehicle keys. While this is common practice, it isn’t customer-focused.
With years of face-to-face customer interaction insight, car rental companies are in a good position to optimize what a counter-less, automated rental process should look like. This advantage over newcomers in the mobility space can help operators to better position themselves with customers.
Growing the Car Rental Market Service Portfolio
The overlaps highlighted with utilization, location, and customer experience show that car rental companies have what it takes to be embrace and offer new forms of mobility. Any regulations that pose a threat to the industry’s success or the ongoing modal shift shouldn’t face resistance from car rental companies. Instead, they need to leverage their strengths of having an established brand and reputation, along with the know-how of vehicle sourcing and management. In addition, car rental operators can use this as an opportunity to further differentiate themselves from other operators in a congested market.
To Leverage Strengths:
- Connected cars – leveraging the internet-of-things and thus enabling access to new business opportunities
- Data monetization – generating revenue with vehicle data and analytics
- Fleet management as a service – leveraging competencies and capacities for new use cases
To Pivot Weaknesses:
- Marketing advancement – creating seamless, simple, user-friendly apps; developing a lean user processes
- Automated car rental – Optimizing workflows through automation and AI
- New vehicle types – diversify the fleet with commercial and electric vehicles
To Use Opportunities:
- Resale retail – leveraging the established, trusted brand by selling defleeted vehicles in-house
- New business models – tapping into new fleet-based opportunities such as carsharing, in-car advertising, and in-car retail
- New vehicle types – diversify the fleet with mopeds and kick scooters
To Minimize Threats:
- Partnerships with TNCs (transportation network companies) – collaborating with ridesharing operators to be more than just a service supplier
- Partnerships with autonomous vehicles – collaborating with future robo-taxi operators to be more than just a service supplier
- Service bundling/MaaS integration – collaborating with mobility aggregator in order to be more than just a service supplier
There are many strategic options car rental operators can move forward with in order to evolve alongside changing consumer and industry demands, just like the big players are already doing. However, the foundation needed to be part of the future of mobility is to have a fleet of connected cars, whether that be with factory installed or after-market telematics. Connected cars enable data collection needed for more better vehicle diagnostics for better maintenance, vehicle usage data to understand use cases, and preparation for V2X (vehicle to anything) communication in smart cities.
Connected cars also act as the starting point to build a stronger, active presence in the shared mobility space. Whether it be automated rentals for consumers or for easier access for transportation network companies, being connected makes this possible.
Some of these initiatives are already being implemented by car rental companies, some to much success. While each company will have to determine the strategic advantage and direction they want to go with new mobility, we want to highlight three initiatives that best represent the next wave of change in mobility:
The large players in the shared mobility space are constantly trying to get a larger piece of the pie, most notably by becoming the platform of choice to aggregate different mobility options. Uber’s acquisition of Jump signalled their interest in meeting shorter trip needs. Daimler’s subsidiary moovel, to be rebranded REACH NOW, combines payment, carsharing, and more onto one platform. Transit focuses on public transportation at its core but needs ride-hailing and carsharing to meet first-last mile needs.
Car rental operators have a large fleet of vehicles. Most of the trips made with rental cars are for longer distances. As peer-to-peer carsharing overlaps more with the car rental market, car rental companies need to be in front of its consumers more, even when there isn’t a need for extra-urban trips. If car rental companies offer their fleet via aggregator apps, they will gain more exposure to potential consumers. As a further step, frequent users of car rentals would appreciate the ease of exploring the city with integrations on the car rental app such Qixxit and DB Navigator.
Micromobility services have infiltrated cities large and small, and the ease of using them has attracted everyone from college students to business professionals. For intra-urban trips, which are trips typically within 2 miles, people are starting to realize that a car isn’t necessary nor the most efficient. Besides walking, micromobility options are fast and simple to use.
While it may seem farfetched for car rental companies to add scooters or mopeds to their fleet, one has to remember that micromobility has proven itself to stay. Even though the short trips are not the intended purpose of car rentals, that doesn’t mean people who rent for 5 days do not have a need for travelling within the city. If kick scooters enable a couple to enjoy the beach without the hassle of looking for parking and walking back to the car, then extra value is given to the customer.
Partnership with AVs
The launch of autonomous vehicles in a public, commercial application like car rentals is inevitable. While the timeline of this is up in the air, car rental companies need to be prepared for it. Autonomous vehicles of the future need to be part of a shared business model, otherwise privately owned AVs will just congest streets even further. This would go against the Shared Mobility Principles for Livable Cities that clearly outlines the need for safe and efficient integrated mobility.
Partnering with AV companies can take the form of financial investment, providing fleet maintenance, or a more active role to pilot different business strategies to future-proof the car rental model. Just like how Hertz has taken best practices from Zipcar’s customer experience, car rental companies can do the same with autonomous vehicles. This path is not as clear as to what would need to be done, but it’s the innovation that will make car rental companies stand out and continue successfully throughout the years.
Car rental agencies face a fork in the road – continue offering their service as-is, or find new ways to be an even more convenient solution for users. Even with investments in shared mobility services, car rental services need to adapt to consumers’ need for more convenience. As mobility becomes more streamlined and less about vehicle ownership, the car rental industry needs to grow and find a way to thrive alongside these changes.