The Car Rental Industry



Automobile rental industry is a multi-billion dollar sector of the usa economy. The US segment of the industry averages about $18.5 billion in revenue a year. Today, there are approximately one particular.9 million rental vehicles that service the US segment of the market. In addition, there are many rental agencies besides the business leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the car rental dubai industry is tremendously consolidated which naturally puts potential new comers for any cost-disadvantage since they face high input costs with reduced possibility of economies of scale. Moreover, a lot of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in total revenue. Hertz came in second position with about $5.2 billion and Avis with $2.97 in revenue.

The rental car industry faces a completely different environment than it did five years ago. According to Business Travel News, vehicles are being rented until they have accumulated 20,000 to 30,000 miles until they are relegated for the used car industry whereas the turn-around mileage was 12,000 to 15,000 miles five years ago. Associated with slow industry growth and narrow profit margin, there isn’t imminent threat to backward integration within the industry. In fact, among the industry players only Hertz is vertically integrated through Ford.
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There are many factors that shape the competitive landscape of the car hire industry. Competition arises from two main sources throughout the thread. On the vacation consumers end of the spectrum, competition is fierce not only because the information mill saturated and well guarded by industry leader Enterprise, but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has a network of dealers over 90 percent the leisure market. On the corporate segment, on the other hand, competition is incredibly strong at the airports since that segment is under tight supervision by Hertz. Because the industry underwent a massive economic downfall lately years, it has upgraded the scale of competition within most of firms that survived. Competitively speaking, the rental car industry is a war-zone as most rental agencies including Enterprise, Hertz and Avis among the major players engage in a battle of the fittest.

Over the past five years, most firms have been working towards enhancing their fleet sizes and increasing the degree of profitability. Enterprise the company with biggest fleet in the us has added 75,000 vehicles to its fleet since 2002 which help increase its number of facilities to 170 at the airport terminals. Hertz, on the other hand, has added 25,000 vehicles and broadened its international presence in 150 counties as instead of choosing to 140 in 2000.