Automobile Rental and Leasing

The auto rental and leasing industry in the US includes 5,000 companies with combined annual revenue of about $35 billion. Large companies include Hertz, Enterprise Rent-A-Car, Vanguard Car Rental Group, Avis Budget Group, U-Haul International (a subsidiary of AMERCO), Ryder, and Dollar Thrifty Automotive Group. The industry is highly concentrated: the 50 largest companies hold more than 80 percent of the market.

COMPETITIVE LANDSCAPE

The industry depends highly on the general state of the US economy because most customers are business or vacation/leisure travelers, whose numbers can rapidly fall during an economic slowdown.

The big companies have economies of scale in acquiring vehicles and customers. Small companies typically operate a single rental location, but can compete effectively with larger companies by providing better service, alternative products, or lower prices. Average annual revenue per employee is about $280,000.

PRODUCTS, OPERATIONS & TECHNOLOGY

Operations are similar for car, truck, or specialty vehicle rental operations. A typical car rental operation has to acquire, maintain, clean, fuel, and repair cars, and dispose of older cars, and must operate a reservation system to acquire customers. Efficient operations are crucial for profitability, because the value of the rental asset is high.

The difference between the acquisition price of cars and their residual value when disposed of is crucial in determining the profitability of rental companies. Large companies like Hertz and Avis buy new cars directly from car manufacturers under "repurchase" or "residual value" ...