However, local markets could still create revenue, owing to people who used to rely on mass transit still needing to get around. Cargo vans are another area that could see activity, serving companies like UPS and Amazon – “but it’s a smaller portion of their rental spread”.
Controlling costs will be vital for car rentals, and one way of achieving this is through cutting the fleet. This can be done through returning cars that are under manufacturer repurchase programmes, as well as selling the rest of the fleet. However, this is a balancing act; removing too many vehicles will mean it’s harder to take advantage of the bounceback in demand when it eventually happens. The specialist also discussed the impact of the outbreak on used car pricing, taking into account the fact that OEMs have cut production.
Another way of saving money is reducing labour costs. “The salary/wage thing is interesting, because there are a lot of different ways they can do it. They can lay people off, they can furlough people. They can have staggered lay-offs, staggered furloughs, they can look at how they’re handling 401(k)s, how they’re handling health benefits. It’s just a matter of how deep will this actually go?”
Once the crisis passes, how airlines operate could still be affected temporarily. In turn, this could impact how many people choose to rent cars. “I think that airport, airplane normalcy, whatever the new normal looks like, I think we’re into 2021 for that.” On the other hand, there could be pent-up demand in the local market, with people taking weeklong trips or hiring a car for more than a month, in late Q2 or Q3 until Thanksgiving.
To access all the human insights from Third Bridge Forum’s Rental Car Industry Update – Coronavirus Impact Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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