AI, EVs, Data & Risks: The Drivers of Future Auto Rental Trends

This article appears in the 2024 ARN Industry Fact Book

If there was one group that serves as an informed fulcrum of industry trend information, it would be the American Car Rental Association.

It just so happens that ACRA held its annual legislative conference one month before the final deadlines for the 2024 ARN Industry Fact Book.

In addition to lobbying on Capitol Hill Oct. 23-25, ACRA provided its members with in-depth panel discussions covering a wide range of business developments and issues facing rental car operators.

Here is a summary of trends distilled from the conference facing the car rental industry in 2024 and beyond:

Electric Vehicle Shake-Up

• The nation and world are moving toward electric vehicles that so far are coming faster with massive amounts of money. It’s the biggest paradigm shift in the history of ground transportation in 100 years. The rental car industry has never faced such a profound change.
• Fleet electrification will spur more policy changes at federal and state levels, as ACRA has created a working group called EV Task Force that meets monthly to make timely and forward-looking policy recommendations to the group’s board of directors. The auto rental industry will need to work with federal, state and local legislators and regulators, as well as diverse stakeholders such as utilities, airports, EV infrastructure providers, and EV manufacturer to determine realistic and attainable goals and procedures.
• Most Americans who don’t yet own electric vehicles will try them for the first time through a car rental. Auto rental providers need to be ready with ways to educate and build confidence among customers and deliver attentive service as they try out EVs. Such positive relationship building offers much potential to serve future customers and increase revenue.
• Integration with telematics will improve available information in electric vehicles on battery status and condition and on charging locations in real-time and on the availability and functional status of of EV chargers. The challenge for the industry is setting up the logistics to find Level 2 and 3 chargers. Telematics also can help with planning, resourcing, and evauating battery charge levels. This would provide operations managers with greater visibility and information on EVs, while helping ensure vehicles remain charged and direct customers where they need to go for a charge.

• Inoperable chargers, and locating chargers where they don’t serve the needs of EV renters and owners, will continue to be the biggest hindrances to EV adoption. While software can help car renters identify usable chargers, it will take time to instill the level of confidence among car renters in charging infrastructure that they’ve had for years in gas stations.
• At the end of 2022, the average price of an electric vehicle was $61,488, compared with $49,507 for all passenger cars and trucks, according to Kelley Blue Book. With EVs costing more than ICE vehicles, it creates uncertainty for rental operators in setting rates, comparing the value and profitability of EVs to economy and compact ICE vehicles, and making long-range business plans for an EV fleet. There will be a time for more certainty, but not likely in the next two to three years.
• Overall, there is a need for more information on electric vehicles – both for car rental operators and their customers. Costs and TCO are still uncertain. Consumer adopton and understanding is fluid. Longevity and resale values are volatile and indeterminate, especially since the Tesla price cuts. Many questions linger.

AI Improvements Ahead

• Artificial intelligence will increasingly provider rental car operators with useful data that through predictive analytics can help find a lost or stolen rental car and detect suspicious activity leading up to a possible theft, such as filling up a gas tank while the car is running.
• AI will improve crash detection, picking up on impacts and then sifting, scoring, and ranking thousands of them to determine accident details and severity. The data also could detect and process damage data from speed bumps, potholes, and train tracks, to see what incidents are happening with more frequency and where.

• Increased data collection on the treatment and performance of rental vehicles will help operators improve training programs for employees and make software applications smarter and more responsive. The more data collected, the more value created.
• AI image processing will improve object classification and clarify damage or effects on a vehicle. The images become a data source that reapplies the data to identify and solve a variety of vehicle-related problems.
• By integrating with maintenance software, AI brings the potential of immediate maintenace alerts and dispatching of technicians to resolve customer problems with rental vehicles. This reduced down time and loss of use, resulting in quicker repair turnounds.
• AI can help set up parameters and tiers to adjust rental vehicle rates in real-time based on market demand and local region.

Data Access Crucial to an Informed Fleet

• Look for more pursuit of poltical and legal actions to enable vehicle owners to retain access to valuable data from the vehicles that helps rental car operators run more efficient operations. The key is to preserve a vehicle owner’s direct and real-time vehicle data access without interaction with OEM hardware or software.
• Rental car operators will need to navigate varying rules across nations and states, which means technology platforms that can aggregate vehicle data will become more essential.
• The industry in coming years will gain more clarity on autonomous vehicles (Avs), and whether they will will work in rental fleets. Legal issues are arising as states increasingly try to regulate AVs in different ways on permits and insurance. While still in a wild west phase, AVs will succeed to the extent that data can be collected and applied in safe and predictive modes with minimal risk.

Auto Rental Risks and Liabilities

• Rental providers will increasinlgy be operating in an environment with more theft and crime, vandalism, and customers who don’t own cars and don’t carry insurance.
• Rental car operators will need to make sure they have clear rental agreements crossed with insurance providers and vetted by attorneys.
• Establish policies at the counter to make sure employees are properly vetting renters. They have to educate customers about buying supplemental insurance.
• As soon as a rental car operator acquires the first car, it must be insured as a commercial vehicle. Treat it as a business, starting with car no. 1.
• Talk to prospective renters and know what they will do with a vehicle. It’s better to not rent a car than expose your company to far worse liabilities.
• An increasing number of rideshare drivers will look to rent vehicles as a means to earn money. Rental car companies should not rent to rideshare drivers unless they can protect themselves via insurance. There aren’t many options in the marketplace to insure them.

• Rideshare drivers are upending the traditional customer model of one renter who makes a few stops over several days and then returns the vehicle. Rideshare drivers generate a new set of maintenance problems long-term because they are very hard on their cars and drive many miles.
• Since insurers are wary of rideshare rentals, operators should not hide that customer segment from underwriters and brokers. This segment may look profitable short-term, but may result in unexpected additional expenses that could change the long-term attraction of ridesharing.
• Car rental operators will need to focus more overall on risk management through solid processes, training, and insurance protections. Protect as much as you can, going up to the limits you can afford.