Before the COVID-19 global pandemic, the car rental industry was thriving, with more people renting vehicles than they did in previous years. When the pandemic hit, it destroyed much of the travel industry, including the rental car market. Many rental car operators and businesses had no choice but to sell many of their vehicles, and even Hertz, one of the largest rental car companies for decades, ended up declaring bankruptcy.
Due to the sudden and ceaseless cutbacks in travel, the car rental market incurred a major drop in revenue. This caused tens of thousands of employee layoffs across the country. In 2020, nearly 40,000 positions in car rental companies were eliminated. In contrast, there was a steady increase in job opportunities in the car rental industry back in 2018 and 2019. Luckily, by 2021, there was a 12.1% boost in the number of people employed in the car rental industry, but the numbers are still not back to normal by any means.
How did COVID affect car rental sales?
When lockdowns were put into place, the amount of car rentals in America dropped significantly. In 2020, only 17.3 million vehicles were rented, compared to 44.5 million rented cars the year before. By 2021, the number of rentals from 2020 had doubled (29.2 million), but this was still very far off from the amount of cars rented pre-COVID. In the near future, the car rental industry is expected not only to bounce back, but to beat out 2019 statistics with an estimated 49.9 million cars purported to be rented in 2025.
Like mentioned previously, many rental car companies sold large chunks of their fleet in order to recoup the losses propagated by travel bans. Some major rental car companies sold more than 770,000 vehicles. That equates to about 1 in every 3 rental cars being sold. After Hertz filed for bankruptcy in May of 2020, they purged 198,000 of their vehicles out of their fleet of 650,000 cars. Although this tactic seemed to work in the short-term, it proved to be only a temporary fix.
What happened to the car rental industry after travel bans were lifted?
Once travel bans began to lift and people started getting back to travelling, with cars being the most popular choice to do so, rental car companies were faced with a new problem: they don’t have enough supply to meet the demand of rental cars. By selling many of their vehicles to make up for the revenue lost due to less travelling, they ended up solving one problem and creating a new one. Once the rental car market began to open back up, many car rental companies simply do not have enough cars to meet the high customer demand.
With lockdowns lifted, people began to start travelling again. Even though lockdowns were no longer happening, it did not mean that it was not possible to contract COVID-19. With medical experts stating that traveling by car is the safest option in terms of staying COVID-free, many citizens felt that driving was a much safer mode of transportation compared to flying. When on a plane, you cannot be sure of someone’s infection status, so it is more likely one would catch COVID while on a plane than while isolated in the safety of their own vehicle.
Rental car supply is not equaling its demand
With a shortage of both rentable vehicles and semiconductor microchips, rental car operators were having trouble keeping up with consumer demand in late 2021. The semiconductor microchip shortage was especially rough on the automobile production industry as these chips are integral to the assembly process. In turn, the lack of semiconductor microchips led to a lack of cars being built, which ultimately led to a lack of inventory for car rental companies to purchase from. This shortage caused rental car companies to raise the price for the cars they do have available for rent, which negatively impacts consumers.
The lack of rental cars available means there are longer wait times for obtaining a rental vehicle. For example, a woman in Massachusetts told the Washington Post she had to wait over two and a half hours to receive her rental car at the Louis Armstrong New Orleans International Airport. She was forced to wait in line for an hour just to get service at all, but the worst part was that she had to wait another hour and a half to actually receive the rental car. On the online travel booking site Kayak, they recommend that travelers book rental cars at least one to three months in advance due to the lack of inventory rental companies had.
Since car rental companies struggled to keep up with the demand for rental vehicles, the rates for rental cars skyrocketed in price once people began traveling again. In April of 2020, a rental car cost about $102 per day. By July of the same year, prices shot up to more than $258 daily. The prices had not been this high since August of 2009, where the daily rate was $242.
Has COVID-19 led to a new version of the car rental industry?
To try and circumvent high rental car prices, long wait times, and vehicle shortages, many consumers began using other modes of transportation. Some opted for transportation applications like Uber and Lyft, while other opted for public transportation like trains, buses, and subways. Others used car sharing applications like Turo, where users are able to borrow a vehicle from a private car owner instead of a commercial car rental business. Some people even went as far as renting moving trucks to travel, as renting a U-Haul allowed travelers to avoid certain fees, particularly the additional fee based on the age of the driver.
With the ups and downs the car rental marketing has experienced during the COVID-19 pandemic, the car industry has evolved with the introduction of new technology, specifically car rental applications. These applications not only streamline the car rental process, but they also provided added flexibility. Overall, while COVID may have negatively impacted the commercial car rental industry, it has made room for a new type of car rental industry that keeps the consumers in mind.
