The vehicle rental market is a multi-billion dollar industry of the US market. The US segment of the industry averages about $18.5 billion in revenue a year. Today, there are approximately 1.9 million leasing vehicles that service the US section of this marketplace. In addition, there are many rental agencies aside from the industry leaders who subdivide the total earnings, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service businesses, the rental car market is highly consolidated which obviously puts potential new comers at a cost-disadvantage because they face high input costs with reduced chance of economies of scale. Moreover, most of the gain is made by a few companies including Enterprise, Hertz and Avis. For the financial year of 2004, Enterprise made $7.4 billion in total revenue. Hertz came in 2nd position with about $5.2 billion and Avis with $2.97 in earnings.
Level of Integration
The rental car industry faces a very different environment than it did five decades back. In accordance with Business Travel News, vehicles are being leased until they have gathered 20,000 to 30,000 miles until they are relegated into the used car industry whereas the turn-around mileage was 12,000 to 15,000 miles five decades back. Due to slow business growth and narrow profit margin, there is no imminent threat to backward integration inside the business. In reality, one of the industry players only Hertz is vertically integrated through Ford.
Scope of Competition
There are many factors that form the competitive landscape of the car rental market. Competition comes from two main sources throughout the chain. On the holiday consumer’s end of the spectrum, the competition is fierce not simply because the market is saturated and well guarded by business pioneer Enterprise, but opponents operate at a cost disadvantage along with smaller market shares since Enterprise has created a network of dealers over 90% the leisure segment. Because the business underwent a huge economic downfall lately, it has updated the scale of competition inside most of the companies which survived. Competitively speaking, the rental car industry is a war-zone as many rental agencies including Enterprise, Hertz and Avis one of the major players participate in a battle of the fittest.
Over the past five decades, most companies have been working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise now the company with the largest fleet in the US has additional 75,000 vehicles to its fleet since 2002 that help increase its number of facilities to 170 in the airports. Exotic Car Rental Ohio , on the other hand, has additional 25,000 vehicles and broadened its global presence in 150 counties as opposed to 140 in 2002. Over the years after the economic recession, although most companies across the industry were fighting, Enterprise one of the industry leaders were growing steadily. Since 2002, the business has begun to recover its footing in the industry as total sales grew from $17.9 billion to $18.2 billion in 2003. According to business analysts, the better days of the rental vehicle industry have yet to come. Within the course of the upcoming several decades, the business is expected to undergo rapid growth appreciated at $20.89 billion annually following 2008”which equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.
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