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10 February, New York, USA, 2021 - The global enterprise car rental market is expected to reach $123 billion by 2025, thanks to rising demand for domestic leisure travel. The market is expected to register a notable 6.3% CAGR during 2020-2025 period. The covid-19 pandemic has brought the aviation industry to a standstill, as increased demand for safety, and high-costs of fuels remain key barriers to air travel. On the other hand, the rental car industry is booming with technological advancements like online bookings, GPS-tracked luxurious travel, short-term insurance coverage, and growing demand to experience luxury travel with high-end cars, and electric vehicles.
Pew Study Shows Reports a Historical Shift Towards Lower Expenditure on Vehicle Purchase
According to Pew Research study conducted between 2010-2013, the young millennials, and x-gen citizens in the US displayed a strong tendency to reduce debts, with fewer owning homes, and cars. The trend is in line with socio-economic general patterns like decisions to delay marriages, and household formation in the US, Japan, South Korea and several other developed nations. Vehicle loan debs have shown a steady decline over the 2000-2010 decade. In 2001, over 45% young adults had outstanding debts, while in 2010, only 32% young adults had an outstanding vehicle debt.
According to the Pew research study, in 2007, 73% households headed by young people in their twenties owned or leased a vehicle. This number dropped to 66% in 2011. Moreover, total vehicle debt also started to decline in size in younger population. The total vehicle debt continuously declined during the 2007-2010 period, marking a strong shift in change in perceptions of young adults examining vehicle purchases as a liability as opposed to an asset. The average vehicle debt for young adults in 2010 stood at $10,000.
Rise in Domestic Leisure Travel to Drive Robust Growth in the Car Rental Market
According to US Travel Association, the US domestic travel increased by 1.9% in 2019 to reach 2.3 billion person trips. Moreover, this marked a significant rise in domestic leisure travel, which rose by 1.9% to make up 80% of all the domestic travel. Moreover, the domestic business travel also witnessed a significant rise with 1.1% increase from 2018 to reach 464 million person-trips. On the other hand, international visitations from countries like Canada, and Mexico decreased to 79 million, marking an increase of 0.7%. Furthermore, the leisure travelers increased their spending by 4.1% in 2019 over 2018. The business travelers also spent 2.2% more on travel. The growing demand for domestic leisure travel, and increased advancements in enterprise rental technology will remain key drivers to growth in the enterprise car rental market.
The rent-a-vehicle trend had already picked up pace before the covid-19 pandemic began. For example, in 2018, Anand Mahindra, the chairman of Mahindra Group, one of the largest passenger vehicle manufacturer in India noted that his daughters do not buy cars anymore. He said their car usage had changed due to increasing prospect of driving in congested urban environments, and his daughters like millions of young passenger prefer to rent instead. Later in the same year, Mahindra auto launched its own car rental service which lets new customers experience car ownership with packaged services like road tax, insurance, breakdown assistance, maintenance, and accidental repairs as part of a yearly rental agreement. The increasing entry of carmakers like Mahindra, promise of automotive cars from big brands like Apple, Uber will drive further product differentiation, and growth for the enterprise car rental market.
Growing Penetration of Digitalization to Drive Growth in Rental Services
According to the International Energy Agency, over 9 million Americans deferred their vehicle purchase in 2019. This is largely due to financial constraints presented by Covid-19, rising prospects of fuel-saving economy through electric vehicles, and change in emission norms like BS-VI. In the next few years, most car manufacturing firms are expected to launch to their own fuel-cell based vehicles, or electric vehicles to fall in line with global initiatives like zero-emissions. This has created tremendous uncertainty in the automotive sector, as except electric vehicle manufacturers like Tesla, very few auto manufacturers have not witnessed a dip in demand over 2019-2020 period. This will likely increase number of buyers looking for economical car rentals in the near future, as public infrastructure remains weak in rural areas of United States.
On the other hand, the supply side of the car rental market has witnessed falling auto prices, due to lowered demand, and large availability of second-hand auto sales in key regions like the US. Additionally, a 2014 Pew research study noted that 90% of all American adults had a mobile phone, and 58% owned a smartphone. Moreover, 63% of total users accessed the internet using their mobile phones. Furthermore, while 74% used their smartphones to get directions, about 65% used it as a permanent guide to get step-by-step navigation. In 2012, nearly 20% Americans updated themselves on traffic congestion using their smartphone devices. The rising penetration of smartphones, easy availability of data services, and coupling technologies like GPS, wireless, cloud, and mobile wallet technologies will continue to remain a major driver for growth in the enterprise car rental market.
Bike-Sharing to Remain a Key Highlight in Urban Areas as Costs Dip
According to a study published by the United States Department of Transportation, universities, and campuses across the US are increasingly deploying closed campus systems to meet growing demand for efficient transportation in small communities. The rise of e-bike sharing trends, combined with electric bikes have been a major impetus for growth in urban areas on a larger scale. The electric bikes are ideal for young students who are looking to exert minimum efforts, while avoiding gaze of by-passers. Furthermore, advancement in electric bike technology enables individuals to cover long-distances in varied landscapes
including steep terrains. Furthermore, the public support for e-bike continues to rise, as government goals to achieve zero emissions, and strengthen public infrastructure continues to drive funding for e-sharing programs. On the side of consumers, e-bikes remain a promising cost-cutting measure. For example, according to the study, in 2012, the average price of 20 bike sharing programs across the US stood at $7.77 for a daily pass. Moreover, first 30 minutes were offered free of charge in all programs. Additionally, 12 programs out of 20 offered monthly memberships, averaging $28.09 per month.
The Enterprise Car Rental Market Report is Segmented as Follows:
Market Breakup by Booking
Rental Length Outlook
Vehicle Type Outlook
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