TBRC Report Highlights the Impact Of COVID-19 on the $240 Billion Automobile Rental And Leasing Market
LONDON, June 3, 2020 /PRNewswire/ -- The automotive industry started facing the effects of the coronavirus in late March, as countries went into complete lockdown and intra-city travels had to be cut down severely. Many cities started restricting movement completely, which impacted the car rentals industry. The stocks of big automotive companies such as General Motors, Ford Motor Company and Fiat Chrysler dropped by over 60%. Restrictions on international travel severely impacted the airport rentals industry. In the US, with the closure of amusement parks and other leisure activity destinations, car rentals for these services have also been negatively affected.
Impact On Automotive Production Bases
Automotive production companies had to stop operations due to staff shortages and city lockdowns. More than 80% of the world's auto supply chain came from China, where the coronavirus originated and hit the hardest. Hubei, one of the four major automobile production bases in China, had to close down its automotive supply plants, and the company experienced a drastic drop in car sales. However, according to the China Association of Automotive Manufacturers (CAAM), by the last week of February, more than 90% of over 300 automotive parts suppliers outside Hubei had resumed production as the situation gradually became better.
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Impact Of The Virus In Asia Pacific's Automobile Rental And Leasing Market
Due to covid-19 impact, car manufacturing facilities across Japan, South Korea, India, Indonesia and China have seen sudden decline in production. The governments of several Asian countries have declared lockdown which includes China, India, and Philippines. In Japan a state of emergency has been declared, which is negatively impacting the car rental market. In countries such as India, due to the COVID-19 outbreak, people around the world are working from home, resulting in a reduction in commuting and non-essential travel, which has drastically affected India's self-service car rental business. Car rental services in India are used by over 23.8 million people, and there are nearly 53 active self-drive car rental companies; this number has gone down drastically since the pandemic. ORIX Auto Infrastructure Services, a business-to-business (B2B) car leasing and rental company, reported a 40-50% drop in its bookings in March alone, across all locations in India.
Strategies That Car Rental Companies Can Adopt To Minimize COVID-19 Impact
To curb the impact of COVID-19 on their businesses, car rental companies can adopt various strategies such as de-fleeting to save costs, focus on delivery and logistical services to meet the revised needs of customers, and offering long-term rental services as customers might find it to be a safer option than short-term rentals. Companies in the market can also offer easier cancellation and rebooking schemes for future trips which will be in demand after the pandemic. Another strategy is to offer free and contactless delivery of car rentals at the customer's choice of pickup location.
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Global Automobile Rental And Leasing Market Growth And Driver
The global automobile rental and leasing market will grow from $366.9 billion in 2019 to $421.3 billion in 2023 at a compound annual growth rate (CAGR) of 3.5%. Despite initial decline in 2020 when the market reached a value of $239.6 billion due to COVID-19, the automobile rental and leasing market is expected to be driven by the growing sales of electric vehicles in the forecast period. Leasing is increasingly being used as a key method to drive electric vehicle sales, especially in developed markets. By offering competitive monthly payment and vehicle return options, leasing compared with other purchasing methods significantly eases consumer concerns around electric vehicle cost and technology obsolescence. In 2018, 80% of electric vehicles were sold via leasing in the US; the lease penetration in new electric vehicles is expected to increase further, thus driving the market.
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