First came the bicycles, which brought the roads. Soon after, came the motor car1 which revolutionised all corners of the world, from increasing a person’s mobility both physically and socially to opening up opportunities to changing the way we access services and facilities. As cars became an integral to modern life, it did not take long before rental services became available. Just as the first mass consumer vehicles rolled off the factory lines with Henry Ford’s model T at the dawn of the 20th century, several of the major car rental companies that we have today were also just starting out. Amongst these, are Avis, Sixt and Hertz which all have a history of over a century.
The quintessential car rental company is seen to have a relatively straightforward business model in which a company with a car allows an individual to use the vehicle in return for a payment based on the number of days or distance used. Indeed, this was the business model for many years and it served the market very well. However, the world is constantly changing and nothing stays the same for long. In an industry defined by speed and convenience, businesses have to evolve to maintain its going concern.
Short Term Car Rentals in Tune with Lifestyles of New Generation of Clients
Growing mobility, connectivity, a quicker pace of innovation and a desire to have more with less gave rise to the asset-light lifestyle2 where people pay for access to use an item instead of owning it outright. In a globalised world where employees frequently relocate for work or on the other side of the spectrum where the office is online and commuting is unnecessary, owning a car may not be the most financially prudent acquisition. In cases like these, access to usage rather than ownership is the important factor. This mindset has also trickled down to corporations that see it as convenient and also financially sensible. It can concentrate on its core business and no longer has to factor in distractions like maintenance, depreciation, disposal, or asset carrying values. The annual figures show a clear indication that this is a growth sector4. The Singapore car rental market revenue made up US$154 million (S$ 210.46 million) in 2018 and is expected to reach US$205 million by 2022. Projected to the coming years, revenues are expected to grow at a CAGR of 11.73 % from 2021 to 2025, with a growth of user penetration from 6.3% in 2021 to 9.3% in 2025. This has created an opportunity for car rental and leasing companies; one that these businesses have been quick to capitalise on.
Car Rental in the Digital Age
Short term car rentals have become a popular alternative to ownership and to continue building on this momentum, car rental companies have had to become much more competitive by offering the following:
People love choices. Being able to select extras like GPS, a sun roof, additional insurance or the ability to include home delivery and pick up of the vehicle all add to customer satisfaction as it accommodates their unique circumstances or preferences.
Convenience and adaptability is another feature that has come to be expected. This can come in the form of hourly, half day or even overnight rentals instead of the traditional daily terms.
With smartphone apps, car sharing has entered a new realm of possibilities. It has never been easier to facilitate this mode of short term car rentals. Cars are collected and returned6 at several possible predetermined spaces for durations that are measured in blocks of 1 hour or 30 minutes. The entire transaction can even be completed on the phone without any human interaction. In addition to cars, Hertz has also made the model of car rentals available to commercial vehicles like good vans.
Smartphone apps have also been used to simplify7 the process of traditional vehicles. With it, customers can skip the queues and reserve their desired vehicle in advance with the options that they want. The apps have also proven beneficial to car rental companies that are now able to build more accurate customer profiles and make tailored offerings
Subscription Based Models
Companies such as BlueSG and WhizzCar6 were amongst the first to operate on a subscription basis. Gradually, more established companies like Hertz and Enterprise caught on8. The advantage to the customer is more competitive pricing because membership all but guarantees that a client is locked into the service. Another benefit is the ability to switch between different makes and models of cars within the fleet of vehicles. A member could be driving an SUV to pick up passengers one day and making use of a goods vehicle the next day to make deliveries.
Just like individuals, corporate clients have been looking for ways to simplify their operations while still being able to preserve or improve their service levels. An asset light strategy suits businesses well as it allows them to tap into a greater range of resources and expertise. For example, chauffeured passenger vans to shuttle VIPs around can be accessed without the need to hire a company driver or to purchase a company vehicle which might be sitting idle for the large part of the day.
Vehicles are considered long term assets and last for the better part of a decade or more. Buying a current model today exposes the owner to obsolescence at some point, especially as advances in technology accelerate. Short term rentals ensure that the newest or at least newer are available for use. This is especially true for technologies like electric or autonomous vehicles.
As the car rental industry undergoes rapid overhaul, the major players have been quickly adjusting9 to the many threats and opportunities. What this means for potential customers is the expansion of choice never before available, challenging the traditional concept of ownership and making short term rentals a more efficient, resourceful and viable alternative.