May 4, 2021 - Economy

Demand for rental cars booms

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Illustration: Rebecca Zisser/Axios

The rental car scramble — and the leap in prices — is a huge consumer headache, but it's paying off for car rental companies.

Why it matters: The pummeled industry is staging a stunning comeback, thanks to pent-up travel demand and increasingly hard-to-find rental cars.

What they're saying: "Put those two things together and it's understandable that prices will be impacted upwards," Avis Budget CFO Brian Choi said Tuesday.

  • Stripping out expenses, Avis Budget — one of the world's largest rental car companies that also owns Zipcar — reported its best first quarter in six years.

Flashback: Rental car companies sold off car inventory when the pandemic hit and travel shriveled.  

  • Now they want to restock to meet demand. But the chip shortage makes that hard. Auto production has been severely hampered, so rental firms can't get all the new cars they want to replenish depleted fleets.
  • The companies are bidding on used cars, "uncharted territory" for players like Hertz and Enterprise, which typically buy new vehicles in bulk, Bloomberg reported.
  • The coming summer travel explosion — paired with low depreciation costs — are “much more than sufficient” to make up for the rental companies' higher car-purchase costs, Morgan Stanley's Adam Jonas told Reuters.

The intrigue: As the car rental market has returned so has investor interest in bankrupt Hertz.

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