Different approaches to fighting the downturn

Going back almost one year and the vehicle rental sector looked even bleaker than it does now. Many names disappeared from the market, either through mergers, being under the administration of loss adjusters or being wrapped up altogether.

The big fear for the industry now is that, as uncertainty about the economy continues, many large car and light vehicle rental companies are trying to buy their share of the market by leasing on a daily basis at ‘crazy prices’. Good news for the end user but sending shivers through the competition who, after suffering four years of trying every trick in the book to keep their heads above water, are having to consider profit first; this period will have probably included foregoing profit for market share at some point, in one form or another, by all of the big players but creditors will only invest for so long before wanting to see return for their dollars.

The British Vehicle Rental and Leasing Association’s chief exec John Lewis called 2010 tumultuous as it drew to a close, which was bore out by the lengths some vehicle rental organisations went through this year just to stay in business, going into 2012.

It is interesting to see how diverse the companies at the forefront of the industry have been with their strategies to survive the economic downturn of recent years.

Northgate, for example, has lost 8,000 of its 60,000 UK fleet; of the remaining 52,000 they have managed to keep 90% of those on the road, showing excellent utilisation of their rolling stock. Bob Mackenzie, Northgate chairman, confirmed they would continue with the same approach rather than try to compete at the crazy prizes on the cards for next year, citing ” hire rate improvement, efficient fleet management, further cost reductions and cash generation,” was their mid-term goal.

Hertz are wary of a price war, too, but in the same breath anticipate if they set their rate too high, other rental firms who have greater depth in the UK will take advantage. Their annual report acknowledged that, with a decreased market, their competition may well bring prices down to secure volume. Hertz, however, have worked hard on their brand recognition – priceless in such lean times.

Conversely, Enterprise Rent-a-car has increased its fleet size in the last 18 months by 25%. The privately owned company now haves a fleet of 50k+ vehicles, of which 16% are vans and has seen its recent investment justified by a 50% growth in its UK airport business over the past 12 months. Their business rental director, Rob Ingram, stands by their mission to be the best value provider, offering “the best possible service at the most competitive price.”

Perhaps taking in an overview of these strategies will help allay Leasedrive‘s Roddy Graham’s fears for 2012 that not all battles will be fought on price alone. We will wait and see.

There is some good news for industry; the BVRLA announce red tape reductions will help unnecessary hassle when it comes to commercial vehicle insurance and the need for drivers to provide proof when hiring a van; details of this move and more paperwork reduction to follow.