The vehicle rental industry is a multi-billion dollar sector of the US economy. The US segment of the industry averages about $18. 5 billion in earnings a year. Today, there are approximately 1 ) 9 million rental vehicles that service the US segment of the market. In addition, there are many rental agencies apart from the industry leaders that subdivide the total revenue, specifically Dollar Thrifty, Budget and Vanguard. Unlike other older service industries, the rentals car industry is highly consolidated which naturally places potential new comers at a cost-disadvantage since they face high input costs with reduced opportunity of economies of scale. Additionally, almost all of the profit is made with a few businesses including Enterprise, Hertz and Avis. For the fiscal year of 2005, Enterprise made $7. 4 billion in total earnings. Hertz came in second position with about $5. 2 billion and Menace with $2. 97 in revenue. Car Rental
Level of The usage
The car hire industry confronts a completely different environment than it did five years ago. According to Business Travel News, vehicles are being rented until they have accumulated 20, 000 to 30, 500 miles until they are relegated to the used car industry whereas the turn-around mileage was doze, 000 to 15, 1000 miles five years in the past. Due to slow industry development and narrow profit perimeter, you cannot find any imminent threat to backward integration within the industry. In fact, among the industry players only Hertz is vertically included through Ford.
Scope of Competition
There are many factors that condition the competitive landscape of the car rental industry. Competition comes from two main sources throughout the cycle. On the vacation card holder’s end of the array, competition is fierce not only because the market is saturated and well guarded by industry innovator Enterprise, but competition operate at an expense drawback along with smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. For the corporate segment, on the other hand, competition is very strong at the airports since that part is under tight direction by Hertz. As the industry underwent a massive economical downfall in recent years, it has upgraded the scale of competition within almost all of the companies that survived. Competitively speaking, the car hire industry is a war-zone as most nightly rental agencies including Enterprise, Hertz and Avis among the major players take part in a battle of the fittest.
Over the previous five years, most businesses have been working towards boosting their fleet sizes and increasing the level of profitability. Enterprise at present the company with the major fleet in the US added 75, 500 vehicles to its fast since 2002 which help increase its range of facilities to 170 at the airports. Hertz, one the other side of the coin hand, has added 25, 000 vehicles and broadened its international occurrence in 150 counties as opposed to 140 in 2002. In addition, Annonce has grown its fast from 210, 000 in 2002 to 220, 500 despite recent economical adversities. Over the years following monetary downturn, although typically through the industry were attempting, Enterprise among the industry leaders had been growing steadily. For example, twelve-monthly sales reached $6. 3 in 2001, $6. 5 in 2002, $6. on the lookout for in 2003 and $7. 4 billion in 2005 which translated into a growth rate of several. 2 percent a season within the past four years. Since 2002, the industry has started to regain its footing in the sector as overall sales grew from $17. 9 billion to $18. 2 billion in the year 2003. According to industry industry analysts, the better days of the rental car industry have yet to come. Over the course of another several years, the industry is expected to experience accelerated growth appraised at $20. 89 billion dollars each year following 08 “which equates to a CAGR of 2. several % [increase] in the 2003-2008 period. “