The Car Rental Industry

    Schultz Nicolaisen
    By Schultz Nicolaisen

    Market Overview
    The vehicle rental market is a multi-billion dollar sector of the US economy. The US section of the industry averages about $18.5 billion in revenue per year. Nowadays, there are roughly 1.9 million rental vehicles that support the US section of the marketplace. In addition, there are lots of rental agencies aside from the industry leaders that subdivide the entire earnings, namely Dollar Thrifty, Budget and Vanguard. Contrary to other mature service industries, the rental car industry is highly consolidated which naturally puts prospective new comers at a cost-disadvantage since they confront high input prices with decreased possibility of economies of scale. Moreover, most of the profit is made by a few firms including Enterprise, Hertz and Avis. For the financial year of 2004, Enterprise generated $7.4 billion in total revenue. Hertz came in 2nd place with roughly $5.2 billion and Avis with $2.97 in revenue.
    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 leased until they've accumulated 20,000 to 30,000 miles till they are relegated to the used car sector whereas the turn-around mileage was 12,000 to 15,000 miles five decades ago. Due to slow industry growth and narrow profit margin, there is not any imminent threat to backward integration inside the business. In reality, one of the industry players only Hertz is integrated through Ford.
    Scope of Competition
    There are lots of factors that form the competitive landscape of the car rental market. Competition comes from two main sources throughout the series. On the holiday consumer's end of the spectrum, the competition is fierce not only because the market is saturated and well guarded by business pioneer Enterprise, but competitors operate at a cost disadvantage combined with smaller market shares since Enterprise has established a network of traders over 90 percent the leisure segment. On the corporate segment, on the other hand, competition is very strong at the airports since that section is under tight supervision by Hertz. Since the industry underwent a massive economic downturn lately, it has upgraded the scale of competition within most of the businesses which survived. Competitively speaking, the rental car market is a war-zone as many rental agencies such as Enterprise, Hertz and Avis one of the major players participate in a battle of the fittest.
    Growth
    Within the past five years, most companies are working towards improving their fleet sizes and raising the amount of profitability. Luxury Car Rental Cleveland Ohio with the largest fleet in america has additional 75,000 vehicles to its fleet since 2002 which help increase its number of amenities to 170 in the airports. Hertz, on the other hand, has added 25,000 vehicles and broadened its international presence in 150 counties rather than 140 in 2002. Over the years after the economic recession, though most companies throughout the sector were struggling, Enterprise one of the industry leaders were growing steadily. As an 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 percent 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 industry analysts, the greater days of the rental car industry have yet to come. Over the course of the next several years, the industry is forecast to experience accelerated growth valued at $20.89 billion annually after 2008"that equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.