Mon. Jan 24th, 2022

Vacationers who want to rent a car in the US are in for a squatter shock. This is the assumption that they can get a vehicle at all. Horror stories abound. Many car parks are empty. In Hawaii, some tourists were even U-haul rental bowls.

The problem? People like Hertz Global and Avis Budget were selling hundreds of thousands of vehicles during the pandemic when demand collapsed and they incurred huge losses. Now they are struggling to replenish fleet as travel bounces back. The chip shortage has forced carmakers to reduce production. The proliferation of Omicron has contributed to demand, with travelers preferring to drive rather than fly.

The average daily car rental rate is about 30 percent higher compared to a year ago. This is 42 percent higher compared to their pre-pandemic levels, according to travel company Kayak.

For car rental companies, these are the good times. At Avis Budget, revenue for the first nine months of 2021 increased by more than two-thirds. Net income was above $ 900 million, compared to a loss of nearly $ 600 million in the previous year period. Avis Budget shares have risen fivefold in the last 12 months.

Even Hertz, which only emerged from bankruptcy in June, managed to raise more than $ 600 million in net profit in its last quarter.

The shortage of rental cars should create an opening for peer-to-peer car sharing companies. The biggest of these, Turo, submitted this week to go public. This comes after rival Getaround allegedly held talks about being driven by a merger with a special purpose procurement company, or Spac.

Founded in 2010, Turo offers an Airbnb-like platform that allows people to rent personal vehicles at any price they choose. Turo charges a commission of up to 40 percent of each booking.

Turo’s main selling point is convenience. Users can search nearby cars for rent and even ask owners to deliver them. Its attractiveness grew during the pandemic. Sales more than tripled to $ 330.5 million in the first nine months of 2021.

Losses also increased. This is telling. If car-sharing companies like Turo, which has been around for more than a decade, can not make money now, one wonders if they will ever do. The balance of benefit remains with Hertz and Avis – and with their larger fleet of vehicles – as the pandemic weakens its grip.

The Lex team is interested in hearing more from readers. Why do car companies struggle to make a profit? Please tell us what you think in the comments section below.

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