Booming demand fuels worldwide car rental market
A booming demand for rental cars is driving up the need for global car rental services. Over the next decade, analysts predict a compound annual growth rate (GAGR) in the region of 6.6%.
A recent FMI (Future Market Insights) research report has helped clarify the phenomenon and found that the growing popularity of carpooling and car sharing has helped to fuel growth in the car rental industry.
In 2016, the industry was valued at just over US$98 million. By 2020, predictions are it will be worth over US$197 million.
Mobility policy taking over from car ownership
For a while the car market has witnessed a trend away from ownership of vehicles to medium to long-term leasing and rental. Once seen as a status symbol, cars are now viewed by many (particularly city and urban dwellers) as a means of transport and part of an overall mobility policy. Tourists and business drivers, who are the primary users of car rental services, seem to see it that way too. People appear less interested in owning than being able to access mobility at a convenient time and place.
Information technology continues to play a key role in the growth of the industry. Massive funds have been committed to the development of mobile applications and advancements in IT infrastructure, online bookings for car rentals have increased worldwide. Recently developed business models have resulted in a bloom of new players into the car rental space. Strong GDP growth in many countries, increases in disposable income and a thriving tourism industry are all factors driving car rental market expansion.
Economy cars win out to premium brands
Economy cars have taken over from luxury and premium brands as the most popular rental vehicles. They contributed to a significant share of revenue in 2016 and accounted for 35.78% of the total revenue generated. It looks like this trend will continue as economy brands are increasingly used by car poolers and intercity travellers.
Interestingly, the rising prevalence of online booking has not yet overtaken offline booking, which has emerged as the higher revenue generator and accounts for 45.74% of the market value. But with the continued proliferation of smartphones and increased acceptance of online channels, it’s a question of when and not if they will outpace their offline rivals.
North American and Western Europe are biggest markets
The airport transport segment of the car rental market accounted for 33.03% of the total in 2016. Asia Pacific is predicted to be the growth region to look out for, flying high on the robust economies of India and China. Although the North American market has outpaced all others, together North America and Western Europe account for an estimated 57.16% revenue share of the global car rental services market but Asia Pacific, excluding Japan, will see the biggest GAGR at 9.1% until 2027.
Owning cars has become costly, what with taxes, parking charges, fuel costs, fines and many ways in which vehicle ownership has become an expensive and unnecessary luxury for many. It’s no surprise, therefore, people are seeking alternative and more economical modes of mobility.