Rebranding, Investments, and Autonomous Cars Hold the Bright Future for the Car Rental Industry

Aug 15
10:15

2017

Deepak Bandal

Deepak Bandal

  • Share this article on Facebook
  • Share this article on Twitter
  • Share this article on Linkedin

The expansion of travel and tourism industry across the globe and the enhanced road infrastructure have driven the car rental industry.

mediaimage

The emergence of driverless cars will also help car rental platforms to grow in the future. Market players are coming up with various strategies to increase their market share in domestic as well as international markets. Investors are also eyeing opportunities in the industry to gain optimum returns. In its recent report on the global car rental market,Rebranding, Investments, and Autonomous Cars Hold the Bright Future for the Car Rental Industry Articles Allied Market Research states that the market is expected to reach $164,335 million by 2022, registering a CAGR of 11.6% from 2016 to 2022. Following are the trends taking place in the car rental industry that would shape the industry in future.

Rebranding: A Wise Strategy to increase Market Share

Car rental companies are rebranding themselves to adapt as per changing market conditions. JustRide, a Y Combinator-backed self-drive car rental service announced that it rebranded itself as Drivezy. This move is a part of strategy of the company to transition from an aggregator model to a marketplace platform. The company also plans to become a peer-to-peer car sharing platform. The individuals will list their cars on the app and it will be micro-leased by Drivezy.

After the two years of service, growing on both demand and supply side, JustRide gain a reputation among serving customers for good service. Then the company transitioned to marketplace model. Ashwarya Singh, CEO and co-founder, Drivezy stated, “After getting selected by Y Combinator and Google, we have investors from around the globe. So, keeping the global perspective in mind and our future plans to expand, we needed a dotcom name.” He further stated that rebranding could have taken place after shifting to marketplace model a year ago, but associating JustRide with a new brand would have been difficult for people. The company is aiming for up to 35% growth post rebranding. Market players are shifting their business models as per changing market dynamics and experience growth in profit margins.

Future of the Car Rental Industry with Emergence of Autonomous Cars

The future holds a huge potential for the car rental market players with an emergence of automated cars. Car manufacturers such as General Motors Company and Ford Motor Company are not the only companies that would experience significant changes in their business models with an emergence of automated vehicle. Car rental companies such as Avis Budget Group, Inc. and Hertz Global Holdings, Inc. would also undergo transformation with the emergence of driverless cars. Eying the need to partner with leading driverless car manufacturers, Avis entered into a multilayer partnership agreement with Waymo driverless car unit of Alphabet Inc. On the other hand, Hertz is collaborating with Apple Inc. to test automated vehicle technology.

These partnership agreements will not result in an immediate financial impact, but it presents good news for investors of these companies. Moreover, it indicates that car rental companies will not become obsolete after a decade and hold huge potential in the driverless car space. Christopher Agnew, MKM Partners analyst stated that rental cars will become more relevant in a driverless car era.

“We believe a large under-appreciated asset for the car rental companies are its fleet management and logistical capabilities as well as its broad geographic footprint, particularly its airport locations,” he added. “Between traditional on-airport car rentals, off-airport rentals, car sharing (Zipcar, Enterprise Car share) and corporate fleet management (Donlen and Enterprise Fleet Management), the car rental industry has broad expertise across different types of fleet management.” The car rental industry has a bright future when driverless cars will hit the roads in coming years.

Strategic Investments heading toward Car Rental Platforms

Startups in the car rental industry are receiving funding from local and international investment groups, enabling them to innovate and offer diverse services. Wukong Zuche, a car rental startup based in Beijing, China has received funding of RMB500 million (US$73 million) from Yunnan Metropolitan Construction Investment Group Co., Ltd. (YMCI Group). The investment is a part of YMCI’s plans for investment of RMB2 billion (US$290 million) in car rental services of Wukong Zuche. The startup will receive RMB250 million (US$37 million) in secured loans and RMB215 million (US$31 million) in equity investment. Wukong is a new generation-car rental company offering an innovative product by integration of thousands of small and medium-sized taxi companies in China. The company received a funding in a series A round worth tens of million RMB from Zhen Fund, Chinese venture capital firm PurpleSky, Bojiang Capital Management Group, and Jinke Junchuang in June 2016. The company plans to use the recent proceedings to expand its business across major cities of China. Investors are eying an opportunities in the car rental industry and making strategic investments to gain maximum profits.