Market Overview The automotive rental business could be a multi-billion dollar sector of the US economy. The US segment of the trade averages concerning $18.five billion in revenue a year. Nowadays, there are approximately 1.9 million rental vehicles that service the US section of the market. In addition, there are many rental agencies besides the business leaders that subdivide the overall revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike alternative mature service industries, the rental automobile business is very consolidated that naturally puts potential new comers at a price-disadvantage since they face high input costs with reduced risk of economies of scale. Moreover, most of the profit is generated by some corporations together with Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.four billion in total revenue. Hertz came in second position with regarding $5.two billion and Avis with $2.97 in revenue. Level of Integration The rental car business faces a completely totally different atmosphere than it did five years ago. Per Business Travel News, vehicles are being rented till they need accumulated 20,000 to thirty,000 miles till they are relegated to the used car industry whereas the flip-around mileage was twelve,000 to 15,000 miles 5 years ago. Because of slow industry growth and narrow profit margin, there's no imminent threat to backward integration among the industry. In fact, among the business players only Hertz is vertically integrated through Ford. Scope of Competition There are various factors that shape the competitive landscape of the automobile rental industry. Competition comes from 2 main sources throughout the chain. On the vacation shopper’s finish of the spectrum, competition is fierce not solely because the market is saturated and well guarded by trade leader Enterprise, however competitors operate at a cost disadvantage along with smaller market shares since Enterprise has established a network of dealers over 90 p.c the leisure segment. On the company segment, on the other hand, competition is very strong at the airports since that phase is beneath tight supervision by Hertz. Because the industry underwent a large economic downfall in recent years, it has upgraded the scale of competition at intervals most of the businesses that survived. Competitively speaking, the rental automotive business may be a war-zone as most rental agencies including Enterprise, Hertz and Avis among the key players interact in an exceedingly battle of the fittest. Growth Over the past 5 years, most firms have been working towards enhancing their fleet sizes and increasing the extent of profitability. Enterprise currently the company with the largest fleet within the US has added 75,000 vehicles to its fleet since 2002 that facilitate increase its number of facilities to 170 at the airports. Hertz, on the opposite hand, has added 25,000 vehicles and broadened its international presence in a hundred and fifty counties as opposed to 140 in 2002. Additionally, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adversities. Over the years following the economic downturn, although most firms throughout the industry were struggling, Enterprise among the business leaders had been growing steadily. For example, annual sales reached $6.three in 2001, $6.five in 2002, $6.nine in 2003 and $7.4 billion in 2004 which translated into a growth rate of 7.two percent a year for the past four years. Since 2002, the industry has began to regain its footing in the sector as overall sales grew from $17.nine billion to $18.2 billion in 2003. According to trade analysts, the higher days of the rental car trade have yet to come. Over the course of the subsequent several years, the business is expected to expertise accelerated growth valued at $20.eighty nine billion every year following 2008 "that equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.”
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The automotive rental business may be a multi-billion dollar sector of the US economy. The US segment of the trade averages regarding $18.five billion in revenue a year. Nowadays, there are approximately 1.nine million rental vehicles that service the US section of the market. Additionally, there are various rental agencies besides the industry leaders that subdivide the whole revenue, particularly Dollar Thrifty, Budget and Vanguard.
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