The car rental industry is a multibillion dollar sector of the US economy. The US segment of the industry averages about . billion in revenue a year. Today there are approximately . million rental vehicles that service the US segment of the market. In addition there are many rental agencies besides the industry leaders that subdivide the total revenue namely Dollar Thrifty Budget and Vanguard. Unlike other mature service industries the rental car industry is highly consolidated which naturally puts potential new comers at a costdisadvantage since they face high input costs 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 fiscal year of Enterprise generated . billion in total revenue. Hertz came in second position with about . billion and Avis with . in revenue.
Level of Integration
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 to miles until they are relegated to the used car industry whereas the turnaround mileage was to miles five years ago. Because of slow industry growth and narrow profit margin there is no imminent threat to backward integration within the industry. In fact among the industry players only 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 vacation consumers end of the spectrum competition is fierce not only because the market is saturated and well guarded by industry leader Enterprise but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has established a network of dealers over percent the leisure segment. On the corporate segment on the other hand competition is very strong at the airports since that segment is under tight supervision by Hertz. Because the industry underwent a massive economic downfall in recent years it has upgraded the scale of competition within most of the companies that survived. Competitively speaking the rental car industry is a warzone 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 level of profitability. Enterprise currently the company with the largest fleet in the US has added vehicles to its fleet since which help increase its number of facilities to at the airports. Hertz on the other hand has added vehicles and broadened its international presence in counties as opposed to in . In addition Avis has increased its fleet from in to despite recent economic adversities. Over the years following the economic downturn although most companies throughout the industry were struggling Enterprise among the industry leaders had been growing steadily. For example annual sales reached . in . in . in and . billion in which translated into a growth rate of . percent a year for the past four years. Since the industry has started to regain its footing in the sector as overall sales grew from . billion to . billion in . According to industry analysts the better days of the rental car industry have yet to come. Over the course of the next several years the industry is expected to experience accelerated growth valued at . billion each year following which equates to a CAGR of . increase in the period.