The Car Rental Industry

July 12, 2018

Car Rental Cleveland is a multi-billion dollar sector of the US market. The US section of the industry averages about $18.5 billion in revenue per year. Today, there are roughly 1.9 million rental vehicles that support the US segment of the market. In addition, there are many rental agencies besides the industry leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Contrary to other mature service businesses, the rental vehicle market is highly consolidated which obviously puts prospective new comers at a cost-disadvantage since they confront high input prices with decreased chance of economies of scale. Furthermore, the majority of the profit is generated by a few companies including Enterprise, Hertz and Avis. For the financial year of 2004, Enterprise generated $7.4 billion in earnings.
Level of Integration
The rental car industry faces a very different environment than it did five years back. According to Business Travel News, vehicles have been rented till 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 kilometers five decades back. Because of slow business growth and narrow profit margin, there is not any imminent threat to backward integration within the business. In fact, one of the industry players just Hertz is integrated through Ford.
Scope of Competition
There are lots of elements that shape the competitive landscape of the car rental industry. Competition comes from two chief sources throughout the chain. On the vacation consumer’s end of the spectrum, the competition is fierce not simply because the market is saturated and well guarded from business leader Enterprise, but competitors operate at a cost disadvantage combined with smaller market shares since Enterprise has created a network of traders over 90 percent the leisure section. On the corporate section, on the other hand, competition is very strong at the airports because that section is under tight supervision by Hertz. Since the business underwent a huge economic downfall lately, it has updated the scale of competition within most of the businesses that survived. Competitively speaking, the rental vehicle market is a war-zone as many rental agencies such as Enterprise, Hertz and Avis among the significant players engage in a battle of the fittest.
Within the past five years, most firms have been working towards improving their fleet sizes and raising the level of profitability. Enterprise currently the company with the largest fleet in the US has additional 75,000 vehicles into its fleet since 2002 that help increase 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 rather than 140 in 2002. Over the years following the economic recession, although most companies across the sector were fighting, Enterprise among the industry leaders were growing steadily. For instance, annual earnings 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 a year for the past four decades. Since 2002, 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 vehicle industry have yet to come. Within the course of the upcoming several decades, the industry is expected to experience accelerated growth appreciated at $20.89 billion each year after 2008”which equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.