In these sustainability-driven eco-conscious days, more people are eschewing buying a car and just opting to rent one for some extensive driving. But the billion-dollar rental car industry is poised for some profound changes post-pandemic, with the influx of electric vehicles (EVs) ready to hit the road.
This impending shift from conventional vehicles powered by fossil fuels to hybrids and all-electric models is also poised to shift the industry’s power roles from European and American vehicular manufacturers to Chinese companies. In fact, the coming EV transition may lead to a change in the composition of rental fleets from an all-Western lineup to one peppered with key players from Asia.
According to Europcar Group chief countries and operations officer Olivier Baldassari, electric vehicles from China, Japan, and South Korea are comparable to their western counterparts in quality. Yet they cost significantly less than cars crafted by leading auto marques. In an industry known for being one of the biggest car buyers in any given year, this leads to considerable savings over time.
The rental industry’s shift to EVs is also seen as a harbinger of things to come, seeing how it is commonly used as a barometer for gauging trends in the automotive sector.
The trend comes as a surprise for all sectors concerned. For example, prior to 2020, rental companies balked at buying electric cars, citing how clients worried that these would power down while on the road. But with EV technology creating vehicles that run faster and farther on a single charge, the game has obviously changed.
How soon is now?
Analysts believe that the shift is timely, seeing how the rental industry was one of the big gainers throughout the pandemic. Moreover, given how social distancing mandates brought both public transport and air travel to a halt, driving vacations became a thing, especially in the United States, prompting a jump in earnings for rental car companies.
As of end-2021, companies noted that they earned a monthly revenue of around $1,200 per vehicle, compared to the $1,000 per car they used to earn before the pandemic hit.
OC&C Strategy Consultants associate partner Nick Mountfield says the pandemic was a wake-up call for many companies who were on the fence regarding the electrification of their fleets. Today, many companies are hopping onto the bandwagon, and a number are either planning to augment their fleets with EVs or have already purchased several EVs.
Long-time industry player Hertz was one of the first to grab a piece of the EV market. It announced its plans to purchase 100,000 units from US automaker Tesla last October, prompting a scramble among its rivals to add EVs to their roster of vehicles.
Meanwhile, France’s Europcar expects to replace 20% of its current fleet with electric or low-emission hybrid vehicles. In particular, the company needs to buy nearly 70,000 eco-friendly vehicles by 2024.