Impact of COVID-19 on the Car Rental Market: Recovery Strategies and Future Outlook (2022-2030)

The global car rental market is expected to expand from USD 92.02 billion in 2021 to USD 149.99 billion by 2030, growing at a CAGR of 7% over the forecast period. This growth is driven by rising demand for convenient mobility solutions, technological advancements in the industry, and increasing consumer preference for rental services over car ownership.

Market Growth Overview

With the expansion of the tourism industry, particularly in regions like North America and Europe, the demand for rental cars has surged, contributing significantly to market growth. The availability of a wide variety of vehicles—ranging from economy cars to luxury vehicles—allows consumers to select cars based on their specific travel needs and preferences. Moreover, the increasing number of car rental service providers has enhanced competition in the market, leading to competitive pricing and more customer-centric services.

Key Market Trends

Several trends have shaped the car rental market in recent years, with technological advancements and changing consumer behavior playing a pivotal role. One of the most notable trends is the integration of smart technologies and mobile applications into car rental services. Leading car rental companies have adopted advanced technologies, including mobile apps, to offer users a seamless rental experience. These apps enable customers to book cars, choose vehicle models, make payments, and even unlock the rented vehicles through their smartphones, enhancing convenience and user satisfaction.

Another important trend in the market is the rising demand for eco-friendly vehicles, as more environmentally conscious consumers prefer renting electric and hybrid cars over traditional internal combustion engine (ICE) vehicles. This shift is a result of growing awareness about carbon emissions and environmental impact. Car rental companies are increasingly adding electric vehicles (EVs) to their fleets to meet the growing demand for sustainable transportation options. Additionally, several governments across the world are offering incentives and tax benefits to promote the use of EVs, further boosting their adoption in the car rental sector.

Moreover, the increasing use of subscription-based models has transformed the way consumers access rental cars. Subscription services, which offer a flexible and cost-effective alternative to traditional car ownership, have gained immense popularity among consumers who value convenience and flexibility. These subscription models allow customers to rent vehicles for a specific period, with the option to switch vehicles or cancel the subscription at any time. As a result, several key players in the car rental market are adopting subscription-based services to attract tech-savvy and cost-conscious customers.

Unlock Key Growth Opportunities: https://www.extrapolate.com/automotive/car-rental-market/25772

Market Dynamics

The global car rental market is characterized by dynamic changes in consumer behavior, technological innovations, and evolving market strategies by key players. The growing preference for mobility as a service (MaaS) is one of the significant dynamics driving market growth. With consumers increasingly opting for shared mobility solutions such as car rentals, ride-sharing, and ride-hailing services, the market for short-term car rentals has expanded.

Additionally, the rise of business travel has contributed to the surge in demand for car rental services, particularly among corporate clients. Business travelers often prefer renting vehicles for the duration of their trips, as it offers them flexibility and convenience. This trend is especially prominent in regions with strong economic activity, such as North America and Europe. Corporate tie-ups and partnerships between car rental companies and businesses have also boosted the demand for rental services.

Despite the positive market outlook, the car rental industry faces several challenges. Fluctuating fuel prices, for instance, can impact the overall cost of car rentals, making it difficult for companies to maintain stable pricing models. In addition, the industry is subject to economic fluctuations, with periods of recession or downturn affecting consumer spending on non-essential services like car rentals. However, the industry's resilience and adaptability to changing market conditions have allowed it to recover quickly and continue growing.

Demand Drivers

The demand for car rental services is primarily driven by the increasing need for on-demand mobility solutions. The rise in urbanization and the subsequent challenges related to traffic congestion, parking availability, and environmental sustainability have led to a growing preference for car rentals over personal vehicle ownership. Urban residents, particularly in densely populated cities, are increasingly opting for rental services as an affordable and hassle-free alternative to owning and maintaining a car.

Furthermore, the growth of the travel and tourism industry is another significant factor driving demand for car rentals. Tourists often rely on rental cars for short-term transportation needs during vacations or business trips, particularly in regions with limited public transportation options. With the easing of travel restrictions post-pandemic, the tourism industry is recovering, and the demand for rental cars is expected to rise accordingly.

In addition, the rise in e-commerce and home delivery services has created opportunities for car rental companies to expand their offerings to include commercial vehicle rentals. Delivery companies and small businesses are increasingly renting vehicles for short-term use to fulfill orders, contributing to the overall growth of the car rental market.

Segmentation Analysis

The car rental market can be segmented based on vehicle type, rental duration, and rental mode. Vehicle type segmentation includes economy cars, luxury vehicles, sports utility vehicles (SUVs), and commercial vehicles. The economy car segment dominates the market, as these vehicles are cost-effective and meet the transportation needs of the majority of consumers. However, the luxury vehicle segment is also gaining traction, particularly among corporate clients and affluent tourists who prefer high-end vehicles for business trips or leisure travel.

In terms of rental duration, the market is segmented into short-term rentals (daily or weekly) and long-term rentals (monthly or annual). Short-term rentals account for a significant share of the market, driven by the growing demand for vacation rentals and business travel. Long-term rentals, on the other hand, are gaining popularity among corporate clients and customers seeking subscription-based rental services.

The car rental market can also be segmented by rental mode, which includes offline and online bookings. While offline bookings (via physical locations) have traditionally dominated the market, online bookings are rapidly growing due to the convenience offered by mobile applications and websites. Consumers prefer booking cars online for their flexibility, ease of comparison, and access to special discounts.

KEY COMPANIES PROFILED:

• Enterprise Holdings Inc. (Missouri, U.S.)
• Hertz Global Holdings (Florida, U.S.)
• Avis Budget Group (New Jersey, U.S.)
• Europcar Mobility Group (Paris, France)
• Lotte rental co.ltd (Gyeonggi Province, South Korea)
• TOYOTA Rent a Car (Aichi, Japan)
• Europcar International (Paris, France)
• Sixt SE (Pullach, Germany)
• Localiza Rent a Car SA (State of Minas Gerais, Brazil)
• CAR Inc (Beijing, China)
• Renault Eurodrive (Boulogne-Billancourt, France)
• Alamo Rent A Car LLC (Missouri, U.S.)

KEY INDUSTRY DEVELOPMENTS:    

In January 2019, Enterprise Rent-A-Car partnered with Premier Group to expand its car rental service offerings in Egypt.

In November 2021, Hertz Rentals announced a partnership with Tesla Motors to supply 100,000 Model 3S vehicles by 2022, with half of these vehicles scheduled to be rented out to Uber drivers.   

SEGMENTATION

By Vehicle Type

• Luxury Cars
• Executive Cars
• Economy Cars
• SUVs
• MUVs

By Rental Duration Type

• Short-Term
• Long-Term

By Application Type

• Local Usage
• Airport Transport
• Outstation
• Others

By Region

• North America- U.S., Mexico, Canada
• Europe- UK, France, Germany, Italy, Spain, Rest of Europe
• Asia-Pacific- China, Japan, India, South Korea, Rest of Asia Pacific
• South America- Brazil, Argentina, Colombia, Rest of South America 
• The Middle East and Africa- GCC, South Africa, Rest of Middle East & Africa

Regional Analysis

The car rental market exhibits significant regional variation, with North America, Europe, and the Asia-Pacific region accounting for the majority of the market share.

North America dominates the global car rental market, driven by the high demand for rental services among both domestic and international travelers. The United States, in particular, is a key market for car rentals, thanks to its vast tourism industry, strong corporate travel sector, and extensive road network. Major players such as Enterprise Holdings and Hertz Global Holdings have a strong foothold in this region, offering a wide range of rental services to cater to the diverse needs of customers.

In Europe, the car rental market is also experiencing steady growth, particularly in tourist hotspots such as Spain, France, and Italy. The region’s well-developed infrastructure, combined with the popularity of self-drive tours, has fueled the demand for rental cars. Additionally, the growing adoption of electric vehicles in Europe has created new opportunities for car rental companies to expand their EV fleets and cater to environmentally conscious consumers.

The Asia-Pacific region is emerging as a key growth market for car rentals, driven by the rapid urbanization and growing middle-class population in countries like China, India, and Japan. The increasing number of domestic and international tourists, coupled with the rising trend of car-sharing and ride-hailing services, has boosted the demand for car rentals in this region. Moreover, government initiatives promoting tourism and infrastructure development are expected to further propel the market’s growth in Asia-Pacific.