Car Rental Market - Growth Drivers and Challenges
Growth Drivers
- Strategic partnerships and platform integration expansion: Strategic partnerships are driving record expansion within the car rental industry by building integrated mobility platforms. These ventures integrate traditional rental offerings with new technologies like ride-sharing apps, autonomous driving, and peer-to-peer sharing platforms. The outcome is the creation of end-to-end ecosystems that extend customer access and diversify revenues beyond conventional business models. Demonstrating this trend, May Mobility grew its autonomous fleet in January 2025 by adding a 30-passenger electric mini-bus, a co-creation with Tecnobus. This addition strengthens the company's self-driving transit in its targeted environments, such as cities, corporate campuses, and airports.
- Accelerating electric vehicle adoption and sustainability initiatives: The shift to electric vehicles is opening up enormous growth prospects for car rental providers that are able to seamlessly incorporate EV fleets alongside promoting customer training and the development of infrastructure. This shift is fueled by both regulations and a demand for eco-friendly transportation choices by customers in both leisure and business travel segments. Uber Technologies introduced Uber Green in India in May 2023, incorporating 25,000 electric vehicles via cooperation with fleet operators and aiming to launch 100,000 electric two-wheelers by 2024 via collaboration with Zypp Electric. The initiative involves cooperation with micro-lender SIDBI for financing 10 billion rupees of clean vehicles' purchases and the installation of charging infrastructure, reflecting holistic strategies of EV integration.
- Expansion in emerging markets and localization strategies: Car rental agencies are realizing significant growth by strategically penetrating high-potential growth markets while tailoring their services to local tastes, regulatory needs, and economic climates. This geographic diversification generates new sources of revenue while lowering the dependence on saturated markets with high competition. In a 2024 report, Orix Corporation announced its financial targets for the fiscal year ending March 2025, which marks the final year of its Medium-term Outlook. The company aims for a net income of ¥390.0 billion and a return on equity (ROE) of 9.6%. Orix Corporation remains committed to its three-year plan's ¥400.0 billion net income target. Furthermore, the company plans to establish strategic alliances with prominent original equipment manufacturers (OEMs), including Maruti Suzuki and Kia, to offer subscription services.
Rise of the Seamless Digital Journey Driving Car Rentals Sector
This table highlights how the industry's investment in digital tools is creating a new, more efficient standard for the rental experience.
|
Digital Transformation Trend |
Customer Experience Benchmarks Year-Over-Year |
Strategic Opportunity for Car Rental Companies |
|
Digital Channels as the Foundation |
Customer satisfaction scores for digital services remain strong, with the website, app quality, and app reliability each scoring 80 out of 100. These scores are higher than those for several in-person interactions. |
Double down on the digital-first journey. Invest in features like augmented reality car previews, AI-powered rental recommendations, and flawless QR code-based check-in/out to make digital the easiest path. |
|
The Contactless Experience Standard |
The process of dropping off a vehicle received a score of 79, which is notably higher than the score of 77 for picking up a vehicle. This indicates that automated and self-service processes are meeting customer needs effectively. |
Accelerate the rollout of fully contactless rentals. Use the app to handle everything from reservation to final receipt, turning the physical lot into a seamless "grab-and-go" experience, which will in turn improve pick-up scores. |
|
Data-Driven Personalization |
The step of making a reservation scored highly at 81 out of 100, showing that customers find the initial booking process to be easy and effective. |
Leverage customer data and loyalty profiles to pre-populate preferences and offer personalized upgrades or options at the time of booking, making the process even smoother and more valued. |
Source: ACSI
Challenges
- Regulatory complexity and changing compliance requirements: The car rental sector is confronted with rising regulatory sophistication as governments introduce new taxes, fees, and operating obligations intended to reduce traffic congestion and the impact of transportation on the environment while providing revenue for transportation infrastructure. These changing regulations pose compliance burdens and operational sophistication that necessitate continuous adaptation and investment in administrative systems.
In January 2025, the Colorado Department of Revenue enforced new daily motor vehicle rental fee rules, including a congestion impact fee under Senate Bill 24-184, on all motor vehicle rentals for 30 days or less and car-sharing rentals for 24 hours or more. The overall fee structure is applied to different types of vehicles, such as peer-to-peer car sharing services, which is indicative of changing state-level strategies on transportation funding through the mechanism of usage-based fees.
- Market volatility and economic sensitivity issues: The car rental business is extremely sensitive to market volatility, economic fluctuations, trade policy, and other economic factors that can significantly affect both operational expenses and consumer spending habits unpredictably. External economic forces tend to bring about sudden changes in vehicle purchasing costs, fleet usage rates, and customer expenditures that make the conventional methods of business planning ineffective.
Car Rental Market Size and Forecast:
|
Base Year |
2025 |
|
Forecast Year |
2026-2035 |
|
CAGR |
11% |
|
Base Year Market Size (2025) |
USD 166.3 billion |
|
Forecast Year Market Size (2035) |
USD 472.2 billion |
|
Regional Scope |
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