THE CAR RENTAL INDUSTRY

Market Overview
The vehicle rental market is a multi-billion dollar industry of the US market. The US section of this industry averages about $18.5 billion in revenue a year. Nowadays, there are roughly 1.9 million rental vehicles that service the US segment of the market. In addition, there are lots of rental agencies besides the industry leaders that subdivide the entire revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car market is highly consolidated which naturally puts potential new comers in a cost-disadvantage since they face high input prices with reduced possibility of economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the financial year of 2004, Enterprise generated $7.4 billion in total revenue.
Level of Integration
The rental car industry faces a very different environment than it did five years ago. In accordance with Business Travel News, vehicles have been rented until they’ve gathered 20,000 to 30,000 miles till they are relegated to the used car sector whereas the turn-around mileage was 12,000 to 15,000 kilometers five decades back. Due to slow business growth and narrow profit margin, there’s no imminent threat to backward integration within the industry. In fact, among the industry players just Hertz is vertically integrated through Ford.
Scope of Competition
There are many factors that shape the competitive landscape of the car rental industry. Competition comes from two main sources throughout the chain. On the holiday customer’s end of the spectrum, the competition is fierce not simply because the market is saturated and well guarded from industry pioneer Enterprise, but competitors operate at a price disadvantage combined with smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. Since the business underwent a huge economic downturn in recent years, it has upgraded the scale of competition within the majority of the companies that survived. Competitively speaking, the rental vehicle industry is a war-zone as many rental agencies such as Enterprise, Hertz and Avis one of the significant players participate in a battle of the fittest.
Growing
Over the previous five decades, most firms have been working towards enhancing their fleet sizes and increasing the amount of profitability. Enterprise currently the firm with the biggest fleet in the US has added 75,000 vehicles into its fleet since 2002 that help increase its number of facilities to 170 in the airports. Hertz, on the other hand, has added 25,000 vehicles and broadened its international presence in 150 counties rather than 140 in 2002. Over the years after the economic downturn, although most companies throughout the sector were struggling, Enterprise among the industry leaders had been growing steadily. Since 2002, the business has begun to regain its footing in the industry as overall earnings grew from $17.9 billion to $18.2 billion in 2003. According to industry analysts, the greater days of the rental vehicle industry have yet to come. Within Car Rental Cleveland of the upcoming several decades, the business is forecast to experience accelerated growth valued at $20.89 billion annually following 2008”that equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.