The car rental industry

Market Overview

The car rental industry is a multi-billion dollar sector in the US economy. The US segment of the industry accounts for around $ 18.5 billion a year. Nowadays, about 1.9 million rental vehicles operate for the US segment of the market. In addition, many rental offices run by industry leaders who allocate total revenue, namely Dollar Thrifty, Budget and Vanguard. Contrary to other mature service industries, the rental automotive industry is highly consolidated, which naturally makes it more cost-effective for potential new immigrants as they face high input costs with reduced economies of scale. In addition, most of the profits are generated by some companies, including Enterprise, Hertz and Avis. For the financial year 2004, Enterprise received a total of $ 7.4 billion of total revenue. Hertz ranked second at $ 5.2 billion and Avis earned $ 2.97.

Level of Integration

The rental car industry is in a completely different environment than five years ago. According to Business Travel News, hiring vehicles until they have accumulated between 20,000 and 30,000 miles until they are in the used car industry while the five-year-old mileage is between 12,000 and 15,000 miles. Due to the slow industry growth and the marginal profit margin, there is no immediate integration within the industry. Indeed, only Hertz is vertically integrated through Ford through the industry.

Scope of Competition

A number of factors shape the competitiveness of the car rental industry. Competition comes from two major sources within the chain. Competition towards consumer end to freedom is not only because the market is saturated and well supervised by the industry's leading business, but competitors have a smaller market share in addition to cost reduction as Enterprise has created more than 90 percent of network traders in the leisure segment. In the corporate segment, however, competition is very strong at airports, as this segment is under the strict control of Hertz. As the industry has suffered a severe economic downturn in recent years, the majority of previously surviving companies have improved the level of competition. Versatile, the rental car industry is a war zone, as most leasing agencies, including Enterprise, Hertz, and Avis are fighting the most important players.


Over the past five years, most companies have been striving to increase fleet size and increase profitability. In the United States, the company currently has the largest fleet of the United States, which has lent 75,000 vehicles to its fleet since 2002, which increases the number of installations at airports in 170. Hertz, however, added 25,000 vehicles and expanded its international presence in 150 counties, compared with 140 in 2002. In addition, Avis increased its fleet from 210,000 to 220,000 in 2002 despite the recent economic downturns. During the years following the economic downturn, though most companies in the industry struggled, Enterprise was growing steadily among Enterprise executives. For example, the annual turnover in 2001 was $ 6.3, $ 6.5 in 2002, $ 6.9 in 2003, and $ 7.4 billion in 2004, an increase of 7.2 percent a year over the past four year. Since 2002, the industry has started to regain the industry's base since total sales in 2003 increased from $ 17.9 billion to $ 18.2 billion. Industry analysts say the better days for the rental car industry are still coming. Over the next few years, the industry is expected to see an accelerating growth of $ 20.89 billion in 2008, which is CAGR 2.7% [increase] in the 2003-2008 period. " [19659002] Distribution

In recent years, the tenant industry has made significant progress in facilitating distribution processes, there are now about 19,000 rental locations that offer about 1.9 million rental cars in the United States. Taking into account the number of US car rental locations, strategic and tactical approaches need to be taken into account in order to ensure proper distribution across the industry. Distribution is carried out in two closely related segments, while cars are distributed in the corporate market around the airports and the hotel. In the leisure segment, however, cars are divided into agency facilities conveniently located on major roads and in metropolitan areas [19659002] In the past, drivers of leasing companies have relied on intestinal feelings or intuitive guesswork to decide on the number of cars in a fleet or on a fleet level of use and performance standards in keeping a fleet of individual cars. With this methodology, it was very difficult to maintain an equilibrium level that satisfies consumer demand and the desired level of profitability. The distribution process is quite simple across the industry. First, drivers need to determine the number of cars on a daily basis. Since there is a very noticeable problem when too many or not enough cars are available, most car rental companies, including Hertz, Enterprise and Avis, use a pool that is a group of autonomous rental homes with a fleet of vehicles it is. rented sites work more efficiently, as they reduce the risk of low inventory if they do not avoid car rental shortage.

Market Segmentation

Most chain cooperatives generate profits depending on the type of car. Leasing cars are classified as economical, compact, intermediate, premium and luxury, with the largest of the five sectors in the economy: for example, the economic segment is responsible for 37.7 percent of total market revenue in 2004. In addition, the compact segment accounted for 32.3 percent of the total revenue, while the other categories covered the remaining 30 percent of the US segment.

Historia l Profitability level

The overall profitability of the car rental industry has shrunk in recent years. Over the past five years, the industry has fought the same way as the rest of the travel industry. Indeed, between 2001 and 2003, the US market moderately reduced the level of profitability. In particular, revenues fell from 19.4 billion in 2001 to 18.2 billion in 2001. Subsequently, total industry revenue continued to fall to $ 17.9 billion in 2002; which is at least $ 17.7 billion, which is the total revenue for 1999. In 2003, the industry experienced barely noticeable growth, resulting in $ 18.2 billion. As a result of the economic downturn experienced in recent years, many of the highly dependent small operators of airlines have implemented a number of strategic rearrangements designed to prepare their companies for potential economic difficulties that could delineate the industry. However, with regard to the year 2004, the economic situation of most enterprises has progressively improved throughout the industry, as most lender agencies have made much more profits compared to previous years. For example, the Enterprise realized $ 7.4 billion in revenue; Hertz's revenues amounted to $ 5.2 billion and Avis's revenues generated $ 2.9 billion in revenue for the 2004 financial year. According to industry analysts, the rented car industry is expected to see 2.6 percent revenue growth in the coming years, which is growing

Competitive Competitors among Sellers

There are several factors driving competition in the car rental industry. In recent years, most car rental companies focused on expanding fleet size and increasing profitability. Enterprise, Hertz and Avis grew among leaders in both sales and fleet sizes. In addition, competition is gaining momentum as companies are constantly trying to improve their current situation and offer more to consumers. Enterprise has nearly doubled the size of the fleet since 1993 to about 600,000 cars. Since the industry is operating at such a low profit, price competition is not a factor; most companies, however, are actively involved in creating value and providing a wide range of technology tools, even for free purchases. For example, Hertz integrates the ever-lost GPS system in its cars. The company uses sophisticated yield management software to manage its fleets.

Finally, Avis uses Onstar and Skynet to better serve the consumer base and offers a free weekend ticket if the customer hires a car for five consecutive days. Moreover, the rental base of the rental car industry is relatively low and there is no switching cost. By contrast, rental agencies are associated with high fixed operating costs, such as real estate, insurance and maintenance. As a result, rental agencies are making pricing priced there for rental cars to only recover the operating costs and meet their customers' needs. Furthermore, as the sector has experienced a slow increase in recent years due to economic stagnation, resulting in a significant drop in both the corporate travel and the leisure sector, most companies, including industry leaders, are aggressively trying to relocate their companies gradually reducing the level of dependency the aviation industry and regaining recreational competition.

Opportunities for New Competitors

Entering the car rental sector will bring new entrants into serious disadvantages. Following the economic downturn in 2001, most of the major tenants have begun to increase their market share in the industry vacation sector over the past few years, such as ensuring stability and reducing the level of dependence between airlines and the car rental sector. Although this trend has been a long-term success for existing companies, it has increased its competitiveness for new immigrants. Because of the severity of the competition, existing companies such as Enterprise, Hertz and Avis carefully monitor their racing radar to predict Sharpe's retaliatory strikes against new entrants. Due to the industry's saturation level, entry has created another barrier.

For example, Enterprise has put the 6000 facilities at the forefront of saturation of the leisure segment and, therefore, not only the most popular distribution channels but also the high demand for new companies. Today, Enterprise sells hired space within 15 miles of 90 percent of the US population. Due to the network of dealers, Enterprise is a nation-wide, relatively stable, recession-proof and most important, it is less dependent on the airline than its rivals. Hertz, however, leverages its full range of 7200 stores to secure its position on the market. Basically, the emergence of industry leaders in the leisure market is not only rivaling but also directly at the level of complexity of the car rental sector.

The Substantial Threat

There are many substitutes for the car rental. From a technical point of view, renting a car is that the distance from the meeting is a less attractive alternative to video conferencing, virtual teams, and collaboration software that enables a company to set up an appointment with its employees all over the world at a cheaper cost. In addition, there are alternatives such as taking the cab, which is a satisfactory substitute for quality and coupling costs, but not necessarily as affordable as a rental car a day or more. While public transport is the most cost-effective alternative, the cost to reach the target is more costly. Finally, as the flight offers comfort, speed and performance, it is a very tempting substitute; this is not an attractive alternative to the price of renting a car. In the business segment, car rental agencies provide greater protection against substitutes, as many companies have used travel policies that determine the parameters of car hire or substitute use.

According to Tracy Esch, the Advantage Marketing Director, you can rent your company 200 miles away before considering an alternative. Basically, the risk of substitution is fairly low in the car rental industry as the effect of substitute products does not pose a significant threat to profit erosion across the industry.

Suppliers' Bargaining Position

Supplier's performance is low in the car rental industry. Because of the availability of substitutes and the level of competition, suppliers have no significant impact on the conditions for the provision of leases. As car hire is usually purchased in bulk, rental car agents have a significant influence on the terms of sale because they have the ability to play a carrier against another to reduce the sales price. Another factor that reduces supplier performance is the lack of switching costs. That is, buyers have no effect on purchasing from one supplier to the other, and most importantly, switching to different vendor products is barely noticeable and does not affect consumers' rental choices.

Buyers' Bargaining Position

While the leisure sector has little or no power, the business segment has a significant influence on the car hire industry. An interesting trend that is currently happening across the industry forces car rental companies to adapt to the needs of corporate travelers. This trend significantly reduces supplier performance or rental companies. and boosting corporate purchasing power, as the business segment is tortured, price-sensitive, well-informed about the industry's price structure, bulk purchases, and lower prices. However, holidaymakers' customers have less influence on rental conditions. As holidaymakers are generally less price-conscious, they buy smaller quantities or buy less often, they have weak negotiating power.

Five Forces

Today, the car rental sector is in a completely different environment than five years ago. In a competitive manner, the revolution of the five car leasing industries has a strong economic pressure, which significantly suppressed the competitiveness of the industry. As a result of the economic downturn in recent years, many companies came to the Budapest and Vanguard Group, as their business infrastructure became undeniable in the competitive environment. Nowadays, very few companies, including Enterprise, Hertz and Avis, have a relatively lower average revenue compared to the rest of the industry. In a realistic sense, the car rental sector is not a very attractive industry due to the level of competition, the barriers to entry and the competitive pressure of the substitute companies

Strategic Grouping

As a moderately focused sector, there is a clear hierarchy in the car rental industry. From an economic point of view, there are differences in a number of dimensions, including revenue, fleet size, and market size that each company holds on the market. For example, Enterprise is the dominant industry with a fleet of approximately 600,000 vehicles, including market size and profitability. Hertz goes to second place in market share and fleet volume. In addition, Avis is ranked third on the map. Avis is one of the companies that regain revenue margins before the economic downturn. For example, in 2000, Avis earned some $ 4.23 billion in revenue. In the next few years, Avis's revenues were considerably lower than in 2000. To reduce uncertainty, most companies gradually reduce the dependence of the aviation industry and the development of the leisure market. This trend is not necessarily in the interests of Hertz because its business strategy is intricately linked to airports.

Key Success Factors

There are several key success factors that result in profitability throughout the car rental industry. Utilizing capacity is one of the factors that determines the successes in the industry. As rental companies experience a loss of revenue in the case of too few or too many people in their fields, it is very important to effectively manage fleets. This success factor is a great force for the industry as it reduces if it does not completely eliminate the possible short run of rented cars. Efficient distribution is another factor that maintains the industry is profitable. Despite the positive relationship between the size of the fleet and the level of profitability, companies continually increase their fleet size due to the industry's competitive environment. In addition, comfort is one of the most important attributes that consumers choose to hire. That is, car rental consumers are more inclined to hire cars from companies that offer convenient rental and landing locations. A common success factor among competing companies is the integration of technology into business processes. With technology, for example, car rental companies create customer satisfaction by making the car rent a very enjoyable endeavor with the convenience of online rental in the alternatives. Additionally, companies provide integrated navigation systems and roadside assistance to help their customers offer car hire.

The Attractiveness of the Industry

Many factors affect the attractiveness of car rental. As the industry is moderately concentrated, new market players are in a disadvantage. That is, its low concentration is a natural barrier to entry to the industry as it allows the existing company to predict a new entry. Due to the risks involved in the sector, it is not very attractive on the market. From the point of view of competitiveness, the leisure market is 90 percent saturated, as Enterprise's strong efforts are dominated by this market. On the other hand, the airport terminals are strongly guarded by Hertz. Realistically, access to the industry offers low profitability against low costs and risks. For most consumers, one of the most important factors is choosing one company to another for price and comfort. For this reason, rental companies are very prudent in setting tax rates and generally force the industry's most important players to better offer consumers less competitiveness. For example, Hertz offers its customers wireless internet access to simplify their travel plans. On the other hand, Avis offers free weekend deals if the customer hires a car for five consecutive weekdays. Based on the impact of the five forces, the car rental sector is not a very attractive industry for potential new entrants.


The rental car industry is restored. While it may seem that the sector is performing well in financial terms, it is still gradually recovering its basis for its actual economic situation over the past five years. As a way of ensuring profitability, in addition to market shares and stability, most chain companies have a common goal of reducing airline dependency levels and moving to the leisure segment. This state of movement has led to fierce competition among industry competitors as they try to protect their market share. From a futuristic perspective, the better days of car hire are still coming. As profitability is growing, I believe that most of the industry leaders, including Enterprise, Hertz and Avis, are delimited by the economic and competitive barriers to the mobility of strategic groups, and new immigrants have greater chance of infiltration and search for success. car rental.


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