Short Term Car Rentals May Soon Be Thing of the Past
Subscriptions touted as a future car rental trend
Funny thing about the transportation business; even though the vehicles are built for people with destinations in mind, it’s ironic that the industry itself demonstrates a great deal of uncertainty when it comes to direction.
Take the car rental sector for instance. Back in the spring, both Enterprise and Hertz announced it was introducing monthly subscriptions to snare an increasingly fickle market, especially when ride-sharing competition was starting to eat into their short-term revenue streams. And with brand loyalty becoming a thing of the past, subscription offers have become another option to go with other added incentives, all in the interest of bolstering customer attention as competitors try to grab a bigger piece of the market pie.
At the same time, automakers like GM, BMW and Daimler are cutting down on their short-term rental options after their own market research has demonstrated their programs are far less convenient than if customers booked their own car rental or ride share.
Which is curious, because other players under the radar are looking at such options as subscriptions and other rental incentives to fill the void that’s being opened up by vehicle manufacturers. Take Michigan-based, international vehicle distributor Penske Automotive Group, for instance. They’re looking at everything from ride-sharing to yes, monthly subscriptions as another way to diversify their business.
“As the automobile industry undergoes rapid change, alternative transportation models are becoming more commonplace, particularly in densely populated urban areas,” said Michael Montri, chief operations officer at Penske Dash. “Our entry into any market will be methodical as we grow in partnership with local communities, pursuing customer satisfaction and repeat business as primary metrics rather than number of users or vehicles.”
Cox Automotive has also been looking at the trend and the company believes the obstacles have little to do with financial uncertainty and more with how to make incentives like subscriptions more convenient for the consumer. “”If the consumer can’t do it easily, they’re going to revert to what is the easiest thing to do,” said David Liniado, vice president for Cox Automotive Mobility Group.
Then there’s the need to figure out a workable model for a fleet-oriented company benefiting from a system them that helped them conduct business in a particular way decides to change horses in mid-stream and pursue a rental direction that’s different from anything its done before. “There’s a lot of operational challenges with running this kind of business. So far, no one has come up with a viable operational model that makes commercial sense,” said Sam Abuelsamid, principal analyst at Navigant Research.