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Is Uber a Threat to Car Rental?

Uber was recently valued at $40 billion. You can quibble with the number, but the takeaway is the ride-sharing concept has revolutionized transportation in just a few years.

As such, market watchers are crunching numbers to see just what portion of the transportation pie that ride-sharing companies such as Uber, Lyft and Sidecar are eating into. Taxi and livery service is a given; the model is patterned in this way — but what about car rental?

First, some metrics: According to data collated and posted on by more than 1,000 Lyft and Uber drivers, for the 2014 calendar year the average trip was 2.69 miles and the average trip duration was 9.62 minutes. For a 10-minute trip, SherpaShare reported average fares for Uber, Lyft and Sidecar of $15.97, $11.48 and $13.35, respectively.

Comparing to rental cars, daily airport rental rates averaged about $51 from March to November 2014, according to Auto Rental News data. Average length of rental for business travel is about three days, while leisure rentals run slightly longer. The average length of a replacement rental is substantially longer — about 10 days, according to data from Enterprise Rent-A-Car.

Average daily mileage for a rental car is best viewed in the context of the rental type, but an overall snapshot of 50 to 80 miles per day points out the divergence in how people use ride sharing compared to car rental.

However, the one form of car rental that has a similar pattern to ride sharing is car sharing — in particular, point-to-point car sharing. Metrics and insight gathered at a public meeting in July 2014 in Torrance, Calif., regarding car2go, the Daimler-owned company that specializes in point-to-point car sharing, offers some direction.

In car2go’s South Bay region of Los Angeles, the service charges $14.99 an hour. South Bay members use car2go usually 30 minutes or less and travel seven to 10 miles on average, a company representative said. This usage pattern comes close to that of ride sharing.

During the meeting, some residents complained they couldn’t find a car2go car when they needed one. In the South Bay, car2go has 150 cars in operation within a 28-square mile radius.

When a ride-sharing company enters a market, the number of available drivers is exponentially greater than the vehicles a company with an owned fleet such as car2go can provide, while wait times for cars are dramatically short. According to a San Francisco-based study by the University of California Transportation Center, 90% of ride-sharing respondents waited less than 10 minutes and 67% less than 5 minutes.

In the South Bay car2go system, unless you happen to be a few blocks from one of the 150 cars stationed within that 28-square-mile radius, you’re going to spend more time getting your hands on a car — if one is available.

For some, ride sharing could be a cheaper and more convenient alternative than car sharing, at least point-to-point car sharing. But ultimately understanding how one model affects the other is no easy task.

Nonetheless, this analysis shouldn’t allow traditional car rental to get complacent while car sharing should be running scared. A 2014 survey by equity trading and research firm MKM Partners LLC sheds light on the impact of ride-share services on both car rental and car sharing.

The survey found that more than 24% of recent ride-share customers said they use Uber as a replacement for traditional rental car services all of the time, while another 51% said some of the time. Nearly 24% said they use Uber as a replacement for car sharing all of the time, while another 48% said some of the time. The percentages are higher for prospective Uber customers who intend to replace car rental or car sharing.

While it’s easier to see how a ride-share trip might usurp car share, it’s less evident exactly how ride sharing would replace daily car rental use.

We can’t answer that here, but that’s not the immediate point. The way we get around is shifting, and all transportation modes need to be constantly evolving into more efficient realms. The models that continue to provide utilitarian value are the ones that will survive.

The car rental industry will be integral to mobility, as long as it serves customers where they live, work and play. If you can address this question effectively, you’ll be all right — unless you get complacent.

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Author Bio

Chris Brown

Executive Editor

Chris is the executive editor of Business Fleet Magazine and Auto Rental News. He covers all aspects of the fleet world.

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