Daily rental companies are being urged to innovate and stand out from the crowd if they are to succeed in an increasingly competitive marketplace.

John Leigh, non-executive director of Nexus Vehicle Holdings and former chairman of the BVRLA, told Fleet News that the rental industry had been “confronted by more challenges than most in recent years”.

Many of the major players are publicly quoted companies and as such are all under pressure to deliver in line with shareholder expectations.

“It’s not an easy place to be,” said Leigh, “especially when coupled with unfavourable market conditions and unpredictable customer demand.”

The challenge for rental companies now is how to maintain market share and margins.

Leigh explained: “Reducing the cost of central overheads wherever possible is required, as are improved systems that will support new initiatives, working practices and products.”

To add to the pressure, the strategy of many manufacturers has changed, restricting supply quotas to the industry, in particular on guaranteed re-purchase vehicles.

For example, Vauxhall, the biggest supplier to rental last year, is continuing to drive down the number of vehicles entering daily rental.

Vauxhall targets 40% cut in daily rental volumes

Last year, almost 52,000 Vauxhalls were registered by daily rental companies, down 10,000 on 2010. This year it is targeting a further 40% reduction – worth 20,000 cars.

Year-to-date, Vauxhall has dropped into second place in the daily rental table behind Ford, which itself has reduced rental volumes in recent years.

Partly as a result of Ford and Vauxhall’s actions, total supply into daily rental fell by 14% last year, equivalent to almost 30,000 cars.

However, other options have been pursued by rental companies, such as the purchase of nearly new cars, while vehicle lives have been extended on risk or owned vehicles.

In addition, the gap created by the likes of Ford and Vauxhall is being filled by an increase in rental sales by Audi, Fiat, Peugeot, Skoda, Toyota and Volkswagen, among others.

Consequently, so far in 2012, rental volumes have risen slightly by 7%, boosting the sector by an additional 6,156 cars.

Ken McCall, managing director of Europcar, said it had, in the main, managed to avoid any significant issues regarding supply shortages from manufacturers.

He said: “In the rare instances where we have anticipated there will be an issue we have extended the vehicles on fleet.”

Meanwhile, Rob Ingram, director of business rental at Enterprise Rent-A-Car, said its outright purchase policy meant it worked more as “business partners” with carmakers.

However, he admitted that the average age of its vehicles is “a few months” higher than a few years ago.

“This is not an issue for the majority of customers,” said Ingram. “The priority for customers is that the vehicle is fit for purpose, in good condition, well-maintained and clean. Age is rarely a factor.

“As we own our own fleet, during peak times we’ve always been able to retain cars a little longer to ensure we can meet the demand of our customers.

“When that demand eases we cycle out the older vehicles. It’s one of the benefits of owning the vehicles outright. We can flex our vehicle acquisitions and disposal to suit demand.”

Manufacturers restricting supply to the industry in recent years has actually caused more stability in supply volumes, as their strategy to supply finite volumes actually forces rental companies to plan the portfolio of supply further in advance, according to Hertz.

“However, reduced stocks of unsold cars and lengthening lead times can restrict our ability to react at short notice to increases in demand,” said Neil Cunningham, general manager of UK and European strategic projects at Hertz.

Survival of the fittest

The industry is certainly recognising the need to innovate. For example, Enterprise has introduced a B2B booking tool and WeCar – a new car sharing service – which is doing especially well in the public sector.

Leigh said: “Although I cannot see a short-term fix, I am confident that in the longer term the rental industry will emerge in far better financial shape than has been experienced in recent years.

“The smart ones must take every opportunity to differentiate themselves and introduce innovations wherever possible. As in the animal kingdom, it is survival of the fittest.”
 

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