Is The Car Rental Industry Consolidation Changing the Industry Dynamics?
Four years before retirement, my business was mobile car washing, and I actually franchised the company around the country. One of our biggest and best customers were car-rental agencies, not only because they had lots of cars, but because they had to be cleaned each time a new person was going to rent one. Many of the companies like Enterprise Rent a Car, Dollar, Budget, Avis, and Hertz did have employees around to pick up the stragglers and wash a car here and there.
Of course when Monday rolled around and they had to have all their cars cleaned all at once, they can hardly handle it. Some of the airport locations had their own car washes on the premises, a mechanized robotic drive-through system to wash and clean the cars rapidly. The other locations found that we were the most efficient method and the lowest cost for cleaning the cars. Indeed what I’m saying is the car-rental industry is very into efficiency, they do what works, and it is highly competitive.
Speaking of competition, size does matter, especially in the minds of the car renting public, and the number of locations. This is why there’s always been a good amount of consolidation in the industry. Indeed, I wonder if someday there may only be one, two, or three rental car agencies in the entire United States, in fact it’s looking that way.
Recently, it appears that Hertz has agreed to buy Dollar Rent-a-Car for $2.3 Billion, and enormous sum of money, this after the Avis deal feel through as they apparently were not trying hard enough? There as an interesting piece in the Wall Street Journal on August 27, 2012 titled; “Hertz Near Deal to Buy Car-Rental Competitor,” by Sharon Terlep and Ryan Dezember. This new giant would become the second largest car rental company in the US by market cap.
Let’s face it, if you’ve ever gone to an airport and seen all of the car-rental agencies lined up in a row you know how many choices there are, it’s not as if we need that many choices, but that’s the way it’s played. If you doubt that there are a number of car-rental agencies even in your area, regardless of where you are, then look in your phone book. Nevertheless, the big boys are merging, and they mean business and they are plotting out their global growth strategy and domestic growth strategy as we speak and much of that is being driven by incredible competition and consolidation.
Should this surprise us? Of course not, and I bet the car manufacturers are worried about this because car-rental agencies are also big buyers of new cars, and the manufacturers don’t want to lose those huge customers. In fact in the past many manufacturers have owned big stakes in car-rental agencies. Indeed I hope you will please consider all this and think on it.