The U.S. car rental market achieved a record $26.1 billion in revenues in 2014, according to data collected by Auto Rental News. That’s more than half of the total revenues for car rental worldwide, estimated at $51.2 billion in 2014, according to a report by Future Market Insights (FMI). The FMI report predicts that the global car rental market will double in five years — reaching $106 billion by 2020 — at a compound annual growth rate (CAGR) of 12.8%. Where will that growth come from?
While the U.S. is the world’s largest and oldest car rental market, it won’t drive that growth. The U.S. market grew at an average of 6% since 2010, and while that’s a healthy number coming out of the Recession, the rate isn’t expected to increase. Similarly, the European car rental market is anticipated to grow at an average annual rate of 3.85% from 2012-2017, according to a report by Ken Research.
The real growth is expected in the world’s emerging markets, particularly in Latin America, in most of the so-called BRIC economies of Brazil, Russia, India and China, and countries in Eastern Europe. Compared to North America and Western Europe, these markets are underpenetrated by the major car rental brands and are comprised to a greater extent by local and independent companies. The growth is driven in part by increasing tourism, but more so by a burgeoning middle class with a comparatively smaller percentage of car ownership.
A collection of statistics paints a picture, or at least part of one:
The aggregate rental (and leasing) fleet in Brazil had grown to an impressive 770,000 units and 5,624 companies by 2014, according to the ABLA, the Brazilian car rental association, with total revenues of R$ 14.7 billion (US$ 4.8 billion).
In India, car rental revenues experienced an annual growth rate of 20% from 2009 to 2014, according to a Ken Research report, for total revenue of $127 million in 2014. That’s small by any comparison, but understanding that only 4% of India’s population of 1.25 billion own cars, the growth potential is apparent.
The Chinese car rental market, similar to other developing countries, is characterized by a relatively low penetration rate and a high level of market fragmentation.
An SEC document relating to the IPO of eHi Car Services Limited, one of China’s biggest providers of car rental and car services (cars with driver), cites statistics that China’s car rental and car services industry grew from RMB 10.7 (US$ 1.72) billion in 2009 to RMB 29.7 (US$ 4.78) billion in 2013, at an annual growth rate of 29.1%. The market is expected to grow to RMB 56.3 (US$ 9.07) billion by 2017.
On the other hand, the Russian market is tiny by comparison: its total size in 2014 was estimated at only $70 million, though that has almost doubled since the total revenue in 2010 of $40 million, according to the Russian Business Consulting Agency. During this period the total car rental fleet jumped from 13,000 to 27,000 units.
Moving to Eastern Europe, from 2009 to 2013 online travel agency gross bookings (for all travel, including car rental) grew at an average annual rate of 31.5%, according to PhoCusWright research.
Growth in these markets isn’t all blue sky, and is tempered by business conditions that are less than ideal. Russia, for instance, suffers from high auto insurance, bureaucratic procedures surrounding accidents, long repair periods due to a lack of spare parts and a general high level of fraud in the country. Russia’s problems are not unique.
At Auto Rental News, we’ll continue to report on the full spectrum of the auto rental industry in the U.S. While we’ve included international news stories for three years in our Global Reporter e-newsletter, it’s time for a deeper dive into the industry in the rest of the world.
We’ll be launching a quarterly digital magazine, Auto Rental News International Edition. It will have the look and feel of the Auto Rental News print edition, with in-depth articles, company profiles, market statistics and analysis, but with a few extras such as live web links. Each edition will focus on four regions of the world: Europe, Latin America, Asia/Australia and Africa/Middle East. Our first edition, due next month, will cover Europe.
At last month’s International Car Rental Show, Diego Solorzano, founder of Carrot, the first carsharing company in Mexico City, presented these telling statistics: metropolitan Mexico City has 26 million inhabitants, and 20 million of them are commuters. Some 15 years ago, only 5% of them were classified as middle to high income. Today, that figure is closer to 15%. “They can afford a car and they don’t want to, and see the hassle of owning a vehicle in Mexico City,” Solorzano says.
Does this represent opportunity for car rental, carsharing and, in a larger sense, personal transportation solutions? Without a doubt. Our new digital edition will be there to report on it.
Originally posted on Business Fleet
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