$1 rental cars

The International Car Rental Show is a once a year gathering covering everything car rentals. For $695 you get to spend a few days in Las Vegas with some of the most interesting companies in the industry.

Three subjects dominated. Artificial intelligence made up 90% of my conversations. But the other two were perhaps more surprising. 

What's not to like about $1/day rental cars?

There were around 800 attendees, or so I was told, and it felt that way–very busy, with a huge amount of international representation. And that's where we start our story.

In Mexico, you can rent a car for $1 per day. A real car, with 4 wheels and everything. Don't believe me? I can prove it, just look:

Screen Shot 2017-03-31 at 4.38.55 PM.png

And before you get clever, yes that's April 1 (screenshot from March 31) and no, it's not an April Fool's joke. Apparently Expedia thinks cars are in high demand–and still, one can be had for $1.

Reality is, of course, more complicated. I will bet you the cost of your flight down there that you will not walk away from the car rental counter having actually paid $1. It'll be more like $35. But, the "$1 problem" is a real thing and it was the second most talked about issue I came across at the conference.

It's a problem because it has created a very unpleasant customer experience at the counter. The companies still need to make $35 or so per day for the cars, and try to make more. But customers think they can pay $1. Nobody is happy. And nobody walks away from that counter with keys unless they were upsold into a profitable rental.

Why autonomous vehicles scare the hell out of smart people

The other surprise subject? Autonomous vehicles. And pure, complete, existential fear.

Most of the time when people say they're scared of autonomous vehicles it's because they are curmudgeons who don't realize that a car with a dozen cameras and lidar is far safer and more aware of its surroundings than your 87 year old grandma in her 1989 Cadillac El Dorado at twilight on an icy Vermont road.

Those people were at Bally's, but they stuck to the slot machines. Rental car people were way, way more scared.

Most astute car rental execs suffer from existential fear over the rise of the autonomous vehicle–for two, huge reasons only one of which you'd realize as a normal, non-industry insider.

First, if everyone is hailing autonomous vehicles like they hail Ubers and Lyfts–but at half the cost–that might dent demand for even a $1 per day car. After all, is parking ever free at a resort hotel? That's the one I bet anyone can put together without a lot of thought. And it's hardly a concern of the car rental companies.

Second, and far scarier for the rental car companies, is that if manufacturers get into the game of renting, not selling, their cars–"mobility" that is–they might not be willing to sell cars to car rental companies anymore. And that is far scarier than new competition, because without cars to rent, the car rental companies have no business.

And it seems to be already happening–General Motors has Maven, BMW has Reach Now, Mercedes has Croove and Car2Go, Elon Musk at Tesla has said some very specific big things about the Model 3 car sharing. And that's just the ones I remember off the top of my head.

Every time someone says "mobility" drink a shot

These fears could be summed up by the word "mobility" which made its way into the titles of both days' keynote presentations. And into every cocktail, coffee break or other conversation we had or overheard.

Personally, I think the fears are overblown: at a basic level, there are use cases for which car sharing or autonomous ride sharing still won't be either ideal or economical solutions. Plus, rental car companies excel at efficiently managing and maintaining fleets; if anything the need for that sort of value proposition will only increase with big fleets of driverless cars roaming the streets. I mean if you only use the car 1/20th of the time, why be on the hook to wash it?

At that rate, who's setting the prices for all of this wonderful "sharing" (cause, you know, Uber has made it pretty clear that "sharing" mean the opposite of "free"). Oh, that's right... Perfect Price could be.

Why I'm not scared

I think the car rental companies do a lot more than they realize. Enterprise creates enough value to employ 200,000 people. Very busy, well managed people. Hertz has one of the most recognized brands in business travel, and commands loyalty beyond many airlines. 

But what they really do is buy a lot of cars. Like, thousands at a time. The operational and economical realities of operating a manufacturing business mean that the car manfuacturers need them. Without the purchases of 5,000 or 10,000 cars–even for a model with annual production 100,000–the manufacturer would swing into the red. All of the manufacturers are addicted. 

Well, all but one: Tesla. Can one company change an industry? 


Artiifcial intelligence is here and will change car rental–but you knew that because you read this blog. What you didn't know is that car rental companies are scared as hell of autonomous vehicles, and that if you go to Kayak.com right now you can book a rental car in Cancun, Mexico for $1 per day. But, you can't actually rent a car for $1 per day–ah, well.

For more, Auto Rental News has more coverage of the conference. And the conference website has keynotes up for you to play your mobility drinking games with. Of course, if you're in the industry, doing pricing and revenue management and fighting off the $1/day competitors, or are a manufacturer about to disrupt everybody, you might call us.


Related Posts