CAR RENTAL
RENTAL RETURNS
Car rental prices are settling down after a long period of volatility but the adoption of electric vehicles by business travellers remains slow
By Rob Gill (published 22 November 2024)
The good news for corporates when it comes to car rental is that price rises have continued to moderate across Europe – and globally – after having to endure some eye-watering increases in previous years.
That trend is set to continue into 2025, with forecasts suggesting an overall year-on-year rise in rental rates of around 2.5 per cent on a global basis. But there are plenty of different market dynamics in regions, countries and cities that mean the picture is far from uniform.
There are also other factors in play such as the currently slow adoption of electric vehicles by business travellers and the diversification of the major car rental suppliers into different areas of ground transport.
Price trends
American Express Global Business Travel’s most recent Ground Monitor report found that car rental rates have reached “a new equilibrium after three volatile years”, which saw significant price hikes and often difficulties for corporates in sourcing the right vehicles as supply chain issues delayed the delivery of new cars.
While these problems are largely now resolved, fellow travel management company CWT is forecasting that global average daily rates (ADRs) will come in at $45.40 in 2024, which would be a 2.5 per cent rise on 2023, with another rise of 2.4 per cent to $46.50 predicted for 2025.
Rental prices in the EMEA region are expected to see even lower increases of 1.1 per cent to an average of $57.60 in 2024, followed by a rise of just 0.9 per cent to $58.10 in 2025.
“The cost of buying and operating cars is easing, and fleet concerns have stabilised, so suppliers are keeping rates in check to stimulate demand,” adds CWT in its 2025 Global Business Travel Forecast.
Mandy Dunbier, ground transport partnership manager for Flight Centre Travel Group, parent company of FCM and Corporate Traveller, also predicts a “stabilisation of prices” in the coming year.
“Increased market competition, coupled with a return to more normalised fleet sizes, will likely contribute to moderating price fluctuations over the next year,” she adds.
But there are considerable variations in car rental rates across Europe, emphasises Sesilia Kalss, senior manager, consulting, at Amex GBT. She adds that UK prices tend to be higher than its neighbours due to vehicle shortages and a lack of available mechanics pushing up costs.
Kalss adds that overall rental costs in Germany will “likely remain high” in 2025, although prices for some type of vehicles “could soften or even reduce, depending on the brand mix in the supplier’s fleet”.
France is expected to see smaller price increases but Kalss warns that strong leisure demand will push up rates “in holiday seasons and popular destinations.”
Prices could also be affected by major car rental companies deciding to keep a tight rein on fleet sizes as a way of maintaining prices and yields.
This message was amplified by Avis Budget Group’s CEO Joe Ferraro who said in a recent earnings call that the “primary goal was to adjust our fleet size throughout the year”. He added that “we are on track to start 2025 with substantially fewer cars than we started with in 2024".
"We will continue to improve as we implement further operational enhancements and remain laser-focused on our fleet discipline," said Ferraro, as Avis Budget looks to target “higher-margin business”.
It’s a similar story for other major players, with Sixt’s co-CEO Alexander Sixt stressing that it would be maintaining “conservative fleet planning at a tight level” during 2025.
Meanwhile, Hertz has made fleet reduction a key component of its current strategy. "We believe we can produce the same number of transaction days with less fleet, which will also benefit our cost structure,” said CEO Gil West.
Slow demand for EVs
One of the biggest talking points within the car rental sector has been the slow take-up of electric vehicles by consumers, including business travellers, with Hertz deciding to scale back its fleet of EVs in 2024. It announced plans to sell 30,000 of its EVs in the US and is replacing them with petrol cars to “meet consumer demand”.
Hertz’s Gil West has stressed that EVs are less than 10 per cent of its fleet and that the slow adoption of these vehicles by travellers was not a “Hertz-only issue”. Sixt has also noted a “lack of momentum” for EVs.
“I would argue probably the whole automotive industry went too far too fast relative to what the actual adoption curves [for EVs] were,” admitted West in an earnings call. “We’ve been adjusting for that. Ultimately, our aim is to really give customers a choice of what vehicles they want to drive, and that includes EV.”
Corporate buyers and industry experts also admit there is currently “low adoption” among travellers for EVs – mainly due to factors such as “range anxiety”, concerns about where and how to charge the vehicles, and simply being unfamiliar with using the vehicles. Even programmes giving travellers the option not to have to fully recharge cars on their return have failed to move the needle so far.
At the ITM's recent autumn conference, several buyers mentioned this ongoing problem. One participant in a ground transport panel added: “There are still practical problems with EVs. What takes five minutes with a petrol or diesel vehicle takes 30 minutes to an hour with EVs. Travellers also worry about what happens if they can’t charge the vehicle or get stranded somewhere.”
Benjamin Park, executive director of travel and sustainability at Parexel International, says demand for electric vehicles is “not there for the traditional rental market of one to three days”.
“EV charging is more complex – with short-term rentals you get different cars each time and drive in different cities. There is too much uncertainty and a lack of charging infrastructure standards,” adds Park.
“We are currently in a transition and it’s been much slower than people expected. But as more people experience EVs in their personal lives, they will be more willing to rent them when travelling on short business trips. I think we could see that happen in the next couple of years.”
Adrian Bewley, assistant vice president of European business rental at Enterprise Mobility, says EVs are “only part of the bigger picture”.
“Thinking more strategically and creatively about employee mobility can have just as big an impact on reducing CO2,” argues Bewley. “Many businesses want to better operate their pool cars. They also want to manage their unmanaged travel, such as the thousands of ‘grey fleet’ trips in older personal cars that drive up emissions.”
A spokesperson for Sixt said that while EVs “deserve their place in our fleet mix”, their adoption is still being impacted by “the reality that many people still feel reluctant when it comes to e-mobility”.
Diversification and distribution
Unlike other areas of ground transport, car rental booking is widely featured within corporate platforms, including distribution through the major GDSs (global distribution systems) and online booking tools (OBTs).
This obviously makes it a much easier category to manage, although one UK-based buyer pointed out that not all of its preferred car rental suppliers were currently available through its travel management company, which led to more complexity.
“We work closely with GDS specialists and industry booking tool providers, focusing on the user experience when an employee is booking car rental,” says Enterprise’s Adrian Bewley. “Late notice requests or vehicle delivery and collection may require specific functionality, and this is where our partnerships help to streamline the solution.
“The customer is always at the centre of our thinking. Drivers want the same exceptional experience, regardless of the booking platform they choose. It’s the provider’s job to ensure that happens.”
Looking beyond traditional car rental, the sector’s major brands are now seeking to offer increased flexibility and a wider range of transport options to the corporate market and travellers.
“There is a new trend coming from the short-term rental companies who see an opportunity in delivering corporate car-sharing and ride-hailing services,” says Sabah Kahoul, general manager of consultancy Business Travel Purchase.
For example, Sixt now offers ride-hailing and car-sharing, alongside traditional car rental, as well as providing company cars and commercial vehicles. Enterprise is also currently expanding its car-sharing fleet in Europe.
Meanwhile Hertz, which has been supplying EVs for Uber drivers in major European cities since early 2023, has recently established a new vertical dedicated to end-to-end fleet management.
Managing fleets, unlike short-term car rental, is one area where electric vehicles have typically seen a much higher and faster adoption within companies – offering rental firms the chance to more successfully utilise their EV fleets.
“It is completely different for long-term rentals where adoption of EVs is high,” says Parexel’s Benjamin Park. “People use the same car, charge at home and know how to charge with their one app.”
One of the other reasons for this higher adoption of EVs within fleets is down to new sustainability reporting regulations, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), where emissions from company cars face more scrutiny as Scope 1 direct emissions. Conversely, emissions generated from short-term car rental forms part of an organisation’s overall Scope 3.6 emissions covering all elements of corporate travel, including flights.
Car rental is a sector that’s seen some unusually dramatic moves in recent times, particularly around prices, but there are signs that things are settling down. All that’s required now is for business travellers to become more confident and experienced in how to use electric vehicles – although that may be easier said than done in the short-term.
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