Sales to Rental Car Industry Propping Up Automaker Numbers
April 6, 2019
March results indicate fleet-dependent firms account for a third of transactions
Despite reports that March car sales were on the upswing, it turns out fewer families, individuals and corporations were buying due to an economy that’s still slugging. But one sector made up for that shortfall, ensuring strong bottom lines for vehicle manufacturers: the rental car industry.
The first three months of 2019 saw roughly 550,000 vehicles being sold to rental fleet firms, up by six percent over the same quarter the previous year. That hasn’t happened since 2016, the last time auto industry activity really peaked.
Similarly, the rental-car industry has been enjoying a ride of its own, with projected increases in business estimated at more than 17 percent between now and 2023. That means those shiny new vehicles coming out of the factory will come in handy to take on those additional bookings.
Sales to rental-car establishments and other businesses that rely on a transportation fleet are a big part of its asset base. Data by Cox Automotive revealed that every major automaker in North America would be in much more dire straits if not for that revenue generated.
Granted, all those car manufacturers lost money in the first quarter of 2019. But the percentage of transactions with car-rentals and companies relying on a fleet as part of its asset base make those losses easier to swallow.
Of all reported fleet sales, roughly 94 percent of those by Nissan were to the car-rental sector, followed by Toyota at 86 percent and Fiat Chrysler at 77 percent. Car-rental sales made up roughly half of GM and Ford’s revenue at 52 percent and 49 percent respectively. Remaining fleet sales were particularly low, much of that attributable to the federal government lockout.
Those trends aren’t expected to last however. While ecstatic over the numbers, many automakers attribute the car-rental spikes to timing more than anything. For the rest of the year, those sales are expected to level off.
In the long run, those anticipated slopes aren’t going to be very beneficial to automaker bottom lines, as they grapple with how to boost commercial sales. Most companies reportedly did well with SUVs, trucks and higher-end vehicles costing more than $30,000, which have been increasing in sales of late. However, economy cars with price tags at $25,000 and lower are dramatically dropping.
Industry experts believe that lower-income families are avoiding showrooms and opting instead for used vehicles. Others, especially younger demographics, are choosing public transit, ride-sharing and even car rentals.
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