Car Rental Market Size, Share & COVID-19 Impact Analysis, By Vehicle Type (Luxury Cars, Executive Cars, Economy Cars, SUVs, and MUVs), By Application Type (Local Usage, Airport Transport, Outstation, and Others), By Rental Duration Type (Short-Term and Long-Term), and Regional Forecast, 2022-2029

The global car rental market size was valued at USD 68.84 billion in 2021. The market is projected to grow from USD 82.54 billion in 2022 to USD 137.25 billion by 2029, exhibiting a CAGR of 7.5% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with car rental experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global car rental market exhibited a decline of -31.05% in 2020 as compared to 2019.

The industry has gained considerable attention due to the increasing penetration of smartphone-based online rental car booking applications. Companies offer cars on a short-term or long-term rental basis to the customers. Most of these services are available in tourist places and tier 1 & 2 cities. Key factors responsible for the substantial growth in this industry include increasing pollution & car prices and cost-effectiveness. The market is emerging as the key vertical in the transportation industry, considerably benefiting consumers and rental companies and car manufacturers. The car manufacturers have come up with lucrative schemes, such as car leasing, which small companies avail to increase their fleet size without hampering their budget.

COVID-19 IMPACT

Substantial Decline in Global Tourism Industry Owing to Nationwide Lockdown May Hamper Growth

According to the International Civil Aviation Organization (ICAO), in 2020, the overall reduction of 2,703 million passengers compared to 2019 and a loss of approximately USD 372 billion of airlines' passenger operating revenues affected the airport transport car rental business. Moreover, as tourism declined worldwide, rental car operators were compelled to sell large parts of their fleets. For instance, in 2020, the number of cars rented in the U.S. amounted to 17.3 million, representing a significant drop compared to 44.5 million rented in 2019. Further, the COVID-19 pandemic resulted in nationwide lockdown in most of the major economies, including China, Japan, the U.K., Germany, and a few parts of the U.S. International travel was banned for a prolonged period of almost 7 to 8 months, which had a significant impact on the global tourism industry. This, in turn, has severely affected the rental business. The pandemic severely impacted the top global rental companies, resulting in market share loss, decreased rankings, market volatility, and downgrades. In addition, in May 2020, the global leader Hertz filed bankruptcy after the demand for rental cars vanished due to the lockdown. The company had to lay off its significant share of employees and dispose of its non-relevant assets.

Furthermore, the lockdown resulted in a significant drop in air traffic as domestic and international travel was restricted during the pandemic. Airlines offered only 51% seats to maintain social distance, causing a total passenger reduction of around 2.89 billion and approximately USD 391 billion loss in airline revenue. This steep fall in travelers hugely impacted the airport taxi business, showcasing a drop of over 30% during the pandemic.

The rental revenues of almost all major companies were hampered significantly. For instance, Avis Budget Group experienced a revenue decline of 42% compared to 2019. Europe car had a 42% drop, whereas Hertz rental showcased 56% fall in revenue and filed bankruptcy in Q3 2020.

LATEST TRENDS

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Offering Enhanced Customer Experience for Customer Retention is the Ongoing Trend in the Market

One of the significant mainstays for vehicle rental companies to grow their business is enhancing their customer experience for customer retention. Some of the companies' factors to improve customer retention are improving response rate, using new technologies, becoming transparent, speeding the booking process, fleet expansion, and others. For instance, in October 2018, Avis Budget Group, Inc. announced a partnership with Ford Commercial Solutions to make renting vehicles easier for customers and improve efficiency by connecting more than 35,000 Ford Motor Company vehicles in the U.S. fleet of Avis.

Offering odorless and spotless vehicles in good condition is another crucial aspect of customer experience in the vehicle rental industry. If the car is not clean and odorless, the customer is more likely to change the rental service for their upcoming rides. Therefore, providing an exceptional customer experience is one of the key trends in the market. Furthermore, the companies are also electrifying fleets and utilizing car rental management software systems for better customer experience to improve customer retention.

DRIVING FACTORS

Rising Need for On-Demand Transportation Services to Propel the Market Growth

Increasing vehicle prices, reduced parking spaces, and expensive car maintenance influence the populace to utilize on-demand transportation services for traveling and daily commute. Therefore, the growing preference for on-demand transportation is likely to boost the market growth during the forecast period.

Increasing smartphone sales also influence the populace to prefer on-demand transportation services. Smartphone apps enable hassle-free booking and offer online payment options for ride-hailing and rental services. Therefore, the growing popularity and rising use of smartphone apps and online platforms provided by ride-hailing companies, such as Uber, Lyft, and others, for car rental services are driving the market growth.

Overburdened Public Transport and Extensive Social Distancing Guidelines are Driving the Market Growth

Overburdened public transport in developing and underdeveloped countries and extensive social distancing guidelines enforced by the government during the COVID-19 pandemic influenced the populace to adopt vehicle rental services for travel and commute. Therefore, this rise in its adoption for comfortable and safe transportation is likely to fuel the car rental market growth shortly.

Moreover, attractive rental subscription plans rolled out by the key players to offer personal mobility to the customers to limit interactions and maintain social distancing during pandemic also fueled the popularity and adoption of these services worldwide.

RESTRAINING FACTORS

Surging Crude Oil Prices to Restrain Market Growth

The world is witnessing rapidly rising crude oil prices worldwide due to high demand and limited supply, increasing the overall cost of driving a rental car. Therefore, these surging oil or fossil fuel prices are expected to hamper the market's growth during the forecast period. According to the U.S. Energy Information Administration (EIA), in 2021, crude oil prices will increase with the increasing number of COVID-19 vaccination. The growing economy and loosened restrictions resulted in a faster surge in global petroleum demand than petroleum supply. High gasoline and diesel prices in several developing countries act as a key restraining factor for offering a car for rent. The rental prices cannot be changed frequently depending on crude oil prices, and eventually, the rental companies face fluctuation in their profits. For instance, the per-barrel price for crude oil was USD 17 in 2000, which was increased to USD 45 in 2020 due to increasing demand globally. Moreover, government taxes lifted the gasoline and diesel prices, considerably affecting the global industry.

SEGMENTATION

By Vehicle Type Analysis

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Economy Cars Segment to Dominate the Market

Based on vehicle type, the market is segmented into luxury cars, executive cars, economy cars, Sports Utility Vehicles (SUVs), and Multi Utility Vehicles (MUVs).

The economy cars segment dominated the global market, with 36.07% market share in 2021. Economy cars are compact, fuel-efficient, and offer enough comfort; thus, they are preferred by a majority of the users. From the rental companies’ perspective, economy cars have low procurement and maintenance costs compared to the luxury cars and executive cars segments. Therefore, the majority of their fleet comprises cars from the economical car range. The majority of the airport taxi and intra-city taxis fall under this category.

Executive cars offer optimum features and comfort at a low cost; therefore, the executive cars segment is expected to be the fastest-growing segment during the forecast period. As the economies of developing countries, including India, China, and Brazil are growing, the number of businesses in these countries is flourishing. To provide better transportation services to employees, the demand for executive cars is steadily increasing worldwide. Moreover, the increasing population of corporate travelers has strengthened the demand for premium executive cars in the rental industry.

The demand for luxury cars is flourishing, owing to the rising disposable income, especially in developing countries in India and China, as the portion of high-income groups is increasing in these countries. Due to market saturation, the developed countries have a moderate demand for these cars. The demand for SUVs and MUVs is growing at an average growth rate as these vehicle types offer large passenger capacity, premium features, and comfort. SUVs are gaining attention for long-term rental, owing to their moderate rental rates and easy availability. These vehicle types are also preferred for leisure and recreational activities.

By Application Type Analysis

Airport Transport Segment is Expected to Hold Largest Market Share

The market is segmented into local usage, airport transport, outstation, and others based on application type.

The airport transport segment will grow exponentially at a CAGR of 7.2% between 2022 and 2029. The key factors attributable to such high growth are increasing air traffic and the number of airports in developing countries worldwide. Moreover, the rise in disposable income of the customers and the growing tourism industry worldwide boost the car rental business near airports. In addition, decreasing air travel fares attract numerous people to shift to air travel from traditional travel modes. Domestic air traffic showcased almost 35% in the last decade. Therefore, the demand for airport rental taxis is anticipated to showcase a high surge in the next few years.

The demand for local transport taxis is growing steadily at a moderate pace. The increasing usage of shared cabs slightly affects the demand for rental cars in local transport. In addition, lowering fares of public transportation, such as buses, trains, and metro, are expected to further impact the growth of the local transport segment. The outstation segment has been witnessing a lower growth rate since January 2020, as the COVID-19 pandemic had negatively impacted the tourism industry, which erased the demand for outstation rental cars.

By Rental Duration Type Analysis

Short Term Segment to Remain Dominant

Based on rental duration type, the market is segmented into short-term and long-term.

The short-term segment dominated the market in 2021 and is anticipated to continue its domination over the forecast period as well. Short-term rental cars are used for applications such as local and airport transportation. Therefore, this segment accounts for the larger market share in the global market. The long-term segment is expected to grow at the fastest CAGR between 2022-2029, as the demand for rental cars is growing exponentially for outstation traveling and corporate leasing.

REGIONAL INSIGHTS

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North America Dominated the Global Market due to Insufficient Public Transport Route Flexibility

Based on region, the market is segmented into North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

North America dominated the global market with over 36.07% car rental market share in 2021. The growth can be attributed to lack of public transportation route flexibility and shift to environment-friendly rental vehicles, thereby increasing the demand for rental cars for leisure activities and business trips in the region. Moreover, the growing tourism in North America and Europe is also surging the demand for rental services.

The introduction of dedicated electric vehicle rental services and the entry of leading automobile industry players in this market are anticipated to grow the business in the European market. However, the Asia Pacific and Latin America scenarios are very different from North America. In these regions, the demand is driven by increasing vehicle prices and fuel costs. As most of the regional population falls under middle-class disposable income groups, rental cars are a preferred choice to fulfill the travel demands.  

Furthermore, the Asia Pacific market is anticipated to grow significantly due to supportive macroeconomic factors and the introduction of a self-driving car rental fleet from key players.

The Middle East & Africa is anticipated to grow at the fastest CAGR over the forecast period, primarily due to increasing businesses and tourism in the region. Due to high disposable income of its citizens and shifting preference toward owning cars, the Middle East region will contribute significantly to the global market.

KEY INDUSTRY PLAYERS

Enterprise Holdings, Inc. is a Key Player in the Market

Enterprise Holdings, Inc. is a car rental company based in Missouri, the U.S. The company holds the world's largest fleet of over 1.7 million rental cars and serves over 8,000 locations in North America, Europe, and Latin America. The company operates three brands under its roof, National, Enterprise Rent-A-Car, and Alamo. The National brand focuses on premium customers and business travelers. The Enterprise Rent-A-Car brand focuses on affordable intercity travelers. The Alamo brand focuses on low-budget travelers, offering affordable rental services. The company has a separate division that sells slightly used rental cars to customers.

Hertz Rental, faced critical challenges and filed bankruptcy during the COVID-19 pandemic. Although the company has a vast distribution network, especially in the U.S., it failed to manage funds well during the lockdown. The company has recently sought financing of USD 1.65 billion to cope with the tough times.

LIST OF KEY COMPANIES PROFILED:

• Enterprise Holdings Inc. (U.S.)


• Hertz Global Holdings (U.S.)


• Avis Budget Group (U.S.)


• Europcar Mobility Group (France)


• Lotte Rental Co. Ltd (South Korea)


• TOYOTA Rent a Car (Japan)


• Europcar International (France)


• Sixt SE (Germany)


• Localiza Rent a Car SA (Brazil)


• CAR Inc (China)


• Alamo Rent A Car LLC (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• June 2022: Carro, an online used-car marketplace in Southeast Asia, bought 50% stake in the Indonesian car rental company, PT Mitra Pinasthika Mustika Rent (MPMRent) for approximately USD 54 million. It is the rental wing of automotive group PT Mitra Pinasthika Mustika.


• January 2022: Sixt announced the expansion of its taxi and rental partner network to Italy. A collaboration with local taxi company itTaxi enables on-demand ride-hailing and rental through the Sixt app.


• December 2021: Enterprise Holdings announced that its subsidiary in Ireland completed the acquisition of Dublin-headquartered Walker Vehicle Rentals. Once integrated, the business will operate as part of Enterprise’s commercial vehicle division, Enterprise Flex-E-Rent. The Walker Vehicle Rental depots in Dublin, Cork, Wexford, Limerick, and Antrim will be rebranded as Enterprise Flex-E-Rent locations.


• August 2021: Zoomcar, an Indian car rental startup, announced its expansion plans worth USD 100 million in Southeast Asia. Through acquisitions and mergers, Zoomcar will reach out to the local vehicle rental network and for the project it will acquire funding through investment funding rounds.


• July 2021: MBK Partners, a private equity fund manager, acquired 100% stake in China's top vehicle rental company CAR Inc. MBK Partners plans to invest in large Chinese players to expand in the Chinese market as it is expected to grow to USD 23 billion in the near future.

REPORT COVERAGE

An Infographic Representation of Car Rental Market

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The market research report provides a detailed analysis of the market and focuses on key aspects such as leading companies, vehicle types, and leading applications of the services. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition, it encompasses several factors that have contributed to the market's growth.

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