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, Long-Term), and Regional Forecast, 2020-2027

The global car rental market size was USD 85.79 billion in 2019. The global impact of COVID-19 has been unprecedented and staggering, with rental cars experiencing a negative impact on demand across all regions amid the pandemic. Based on our analysis, the global market exhibited a lower growth of -32.0% in 2020 as compared to the average year-on-year growth during 2016-2019. The market is projected to grow from USD 58.34 billion in 2020 to USD 144.21 billion in 2027 at a CAGR of 6.7% in the 2020-2027 period. The rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.

The car rental industry has gained considerable attention in the last decade owing 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. The majority of these services are made 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 benefitting not only consumers and rental companies but also car manufacturers. The car manufacturers have come up with lucrative schemes, such as car leasing, which are availed by small companies 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

The COVID-19 pandemic has resulted in nationwide lockdown in most of the major economies including China, Japan, the UK, Germany, and a few parts of the U.S. International traveling 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 had a severe impact on the top global rental companies resulting in loss of market share, decrease in rankings, market volatility, and downgrades. In addition, In May 2020, the global car rental leader Hertz filed bankruptcy after the demand for rental cars vanished due to the lockdown. The company had to lay-off its major share of employees and dispose of its non-relevant assets.

Moreover, the lockdown has resulted in a significant drop in air traffic as both domestic as well as international traveling was restricted during the pandemic. Airlines were offering only 51% seats to maintain social distancing causing a total passenger reduction of around 2.89 billion and approximately USD 391 billion loss in airline revenue. This steep fall in travellers 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 market revenue decline of 42% compared to 2019, Europe car had a 42% drop whereas Hertz rental showcased a 56% fall in revenue and filed bankruptcy in Q3 2020.

LATEST TRENDS

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Increasing Smartphone Penetration in Developing Countries to Favor Car Rental Market Growth

The decreasing smartphone prices have boosted the adoption of smartphones, especially in developing countries including India, China, Brazil, and Indonesia. For instance, it is estimated that the number of smartphone users will rise to around 970 Million by 2025. Companies around the world are eying on this opportunity by offering smartphone-based online car booking applications. Various third-party companies are also acting as a facilitator by offering their booking platform and consolidating all major rental companies on a single platform.

These online platforms have eased the overall car renting process as the user needs to verify his/her document only once. In addition, features including online transactions and easily located dropping points are also provided. The applications also help the renters in fleet management, disaster management, emergency services, receiving online payments, and monitoring vehicle health & location remotely. All such lucrative features offered by the online platforms make them a preferred mode for renting a car.

DRIVING FACTORS

Rising Number of Air Travelers to Propel Market Growth

As per Boeing CEO Dennis Muilenburg, less than 20% of the global population has never set foot on an airplane, one of the key reasons for such a low count is high travel fare compared to the normal transportation mediums. However, as the number of aircraft is growing worldwide, the air travel fare is decreasing relatively, which in turn is estimated to boost the number of air travellers in the upcoming years. As per International Air Transport Association (IATA), the global air travellers’ count may reach 7.2 Billion by 2027. As airport taxi comprises a major share of the global market, the growth in air traffic shall directly benefit the market.

Increasing Demand from Corporate Travelers to Boost the Market Growth

As businesses are expanding globally, the number of business travellers is growing substantially since the last decade. The increasing population of corporate travellers has strengthened the demand for premium executive cars in the rental industry. Executive cars offer ease of travel and comfort on a cost-effective budget, therefore the demand for such cars is growing worldwide. Many companies are focusing only on the corporate segment, considering the lucrative business opportunities and growth potential offered by this market. The demand for ride share is expected to further boost the market demand for car rental businesses.

RESTRAINING FACTORS

Surging Crude Oil Prices to Restrain Market Growth

The automotive & transportation industry has a direct impact on the fluctuation in crude oil prices. High gasoline and diesel prices in several developing countries act as a key restraining factor for offering a car on rent as the rental prices cannot be changed frequently depending on the crude oil prices and eventually the rental companies face fluctuation in the 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 lift 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 the vehicle type, the market is segmented into Luxury cars, Executive cars, and Economy cars, Sports Utility Vehicles (SUVs), and Multi Utility Vehicles (MUVs).

The economy cars segment dominated the global car rental market, with a 37.18% market share in 2019. Economy cars are compact, fuel-efficient, and offer enough comfort, therefore are preferred by a majority of the users. From the rental companies’ perspective, the economy cars have low procurement and maintenance costs compared to the luxury and executive cars segment, 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 low cost, therefore the executive 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 stronger, the number of businesses in these countries is flourishing. In order to provide better transportation services to employees, the demand for executive cars is growing steadily worldwide.

The demand for luxury cars is flourishing in India and China as the portion of high-income groups is increasing in these countries. The developed countries have a moderate demand for these cars owing to market saturation. The demand for SUVs and MUVs is growing at a moderate growth rate as these vehicle types offer large passenger capacity, premium features, and comfort. Especially, 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

Interior type Segment is Expected to Hold the Largest Car Rental Market Share

Based on the application, the market is segmented into Local Usage, Airport Transport, Outstation, and Others.

The airport transport segment is anticipated to grow exponentially at a CAGR of 6.5% between 2020 and 2027. The key factors attributable to such high growth are increasing air traffic and the number of airports in developing countries worldwide. The decreasing air travel fares are attracting numerous people to shift to air travel from traditional travel modes, owing to which, domestic air traffic showcased a surge of 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 is slightly affecting the demand for rental cars in local transport. In addition, lowering fares of public transports, such as bus, train, and metro, are expected to further impact the local transport segment growth. The outstation segment is witnessing a lower growth rate since January 2020, as the COVID19 pandemic had negatively impacted the tourism industry, which in turn vanished the demand for outstation rental cars.

By Rental Duration Analysis

Short Duration Rental Segment to Remain Dominant

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

The short-term segment dominated the market in 2019 and is anticipated to continue its domination over the forecast period as well. Short-term rental cars are used for applications, such as local transportation and airport transportation, therefore the segment accounts for the larger market share in the global market. The long-term segment is expected to grow at the fastest CAGR between 2020 and 2027, as the demand for rental cars is growing exponentially for outstation traveling as well as corporate leasing.

REGIONAL INSIGHTS

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Middle East & Africa to Emerge as Fastest Growing Region

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

North America is estimated to dominate the global market with over 37% market share in 2019. The growth can be attributed to the increasing demand for rental cars for leisure activities and business trips in the region. Moreover, the increasing tourism in North America and Europe is also driving demand for car rental services in these regions.

The scenario in Asia Pacific and Latin America is very different from that of North America. In these regions, the demand is driven by increasing vehicle prices as well as fuel costs. As the majority of the regional population falls under middle-class disposable income groups, rental cars are a preferred choice to fulfill the travel demands. The Middle East & Africa is anticipated to grow at the fastest CAGR over the forecast period, primarily due to the increasing businesses and tourism in the region.

KEY INDUSTRY PLAYERS

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

Enterprise Holdings, Inc. is a 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 travellers, the Enterprise Rent-A-Car brand focuses on affordable intercity travellers, and the Alamo brand focuses on low-budget travellers, offering affordable rental services. The company has a separate division that focuses on selling slightly used rental cars to customers.

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

LIST OF KEY COMPANIES PROFILED:

• Enterprise Holdings Inc. (Missouri, U.S.)


• Hertz Global Holdings (Florida, U.S.)


• Avis Budget Group (New Jersey, U.S.)


• Europcar Mobility Group (Paris, France)


• Lotte rental co.ltd (Gyeonggi Province, South Korea)


• TOYOTA Rent a Car (Aichi, Japan)


• Europcar International (Paris, France)


• Sixt SE (Pullach, Germany)


• Localiza Rent a Car SA (State of Minas Gerais, Brazil)


• CAR Inc (Beijing, China)


• Renault Eurodrive (Boulogne-Billancourt, France)


• Alamo Rent A Car LLC (Missouri, U.S.)

KEY INDUSTRY DEVELOPMENTS:

• In September 2020, Enterprise Holdings Inc., acquired Discount Car and Truck Rentals, a leading Canadian car and truck rental company serving customers across Canada. The acquisition shall help Enterprise Holdings Inc., to expand its fleet size and service offering in Canada. The company shall acquire all the Canadian and Quebec locations held by Discount Car and Truck Rentals.


• In September 2020, Localiza Rent a Car SA acquired Unidas, a Brazilian car rental company and close rival of Localiza for USD 2.18 Bn, the company shall acquire 76.9% stake in the Unidas and they shall operate a fleet of over 4,70,000 vehicles together. This acquisition is anticipated to boost the overall market share of Localiza and shall help the company to improve its services across Brazil.

REPORT COVERAGE

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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 to the factors above, the report encompasses several factors that have contributed to the growth of the market over recent years.

Report Scope & Segmentation