Car Rental Market Analysis

Car Rental Market Analysis

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Based on rental length, the market is divided into short term and long term. In 2023, the short-term segment was valued at over USD 90 billion. Short-term car rental service offers a cost benefit to the consumer. Especially in urban areas, car ownership is expensive with factors such as parking costs, maintenance, and insurance.
 

Short-term car rental service allows access to a car only when one needs it, saving money in the long run. This caters to a variety of needs, from weekend getaways to errands or last-minute appointments and offer the flexibility to choose the perfect car for the specific situation. The car rental market is adapting to changing travel patterns by offering more flexible and tailored rental options, particularly for leisure travelers. For instance, in January 2024, Hertz expanded its short-term rental options, providing tourists with affordable and convenient solutions for short trips, with promotions targeting popular vacation destinations.
 

Based on vehicle, the car rental market is categorized into luxury cars, executive cars, economy cars, SUVs, and MUVs. The economy cars segment is anticipated to register a CAGR of over 6% from 2024 to 2032. The growth is driven by the cost effectiveness that an economy car offers. Economy cars provide lower rental rates and better fuel efficiency. This makes them attractive to budget-conscious travelers and individuals. They have lower emissions, aligning with the increasing environmental consciousness among consumers. Renters are opting for smaller, more eco-friendly vehicles to reduce their carbon footprint.
 

In urban areas with tight parking spaces and heavy traffic, the smaller size and maneuverability of economy cars make them a more practical choice compared to larger vehicles. Car-sharing services are adapting their fleets to match urban mobility trends and customer preferences for more efficient transportation options. For instance, in April 2024, Zipcar expanded its fleet to include more economy cars, responding to the growing demand for compact and efficient vehicles in urban environments. This strategic move enhances urban convenience, as economy cars are easier to maneuver and park in congested areas.
 

In 2023, North America dominated the car rental market with around 45% of the market share. The region’s cities are becoming more densely populated leading to the increased demand for shared transportation solutions. There is a growing preference for vehicle sharing instead of ownership in urban areas. Popular tourist destinations in the region, such as national parks, coastal areas, and cultural sites, have seen a rise in visitors. Car rentals provide a convenient way for tourists to explore these locations.
 

The growth of peer-to-peer car rental is growing in region as it provides car owners an alternative source of income. Ride-hailing companies are diversifying their services and entering the car rental market, leveraging their existing user base and technology platforms to offer new mobility solutions. For instance, in June 2024, Uber expanded its services in North America by introducing a peer-to-peer car rental platform, which will allow individuals to rent out their personal vehicles through the Uber app.
 

Europe is a major global travel destination, attracting millions of tourists each year. The growth in international and domestic tourism drives the demand for rental cars as visitors seek convenient and flexible transportation options to explore the diverse regions. Increasing urbanization in cities is creating a demand for flexible transportation solutions, fueling the demand of car rental services in the region.
 

The Asia Pacific region is experiencing significant economic growth, leading to a rise in disposable income and increased travel spending. This fuels the demand for leisure travel and car rentals for exploring new destinations. A growing middle class in many Asian countries signifies a larger population with the means to afford car rentals for personal or business purposes, driving the market growth in APAC.