Rental-car companies could face an "existential crisis" from the coming mobility revolution, according to AlixPartners survey

26 July 2018

35% of rental consumers have replaced renting with ride-hailing in the past year; 48% who are aware of ride-hailing but haven’t yet switched would if ride-hailing costs fall to 20% below rental’s

NEW YORK (July 26, 2018) – Results from a new consumer survey and accompanying report undertaken by AlixPartners, the global consulting firm, suggest that traditional rental-car companies could be facing an “existential crisis” as the current revolution in personal mobility continues to unfold. 

According to the survey of more than 2,000 adult Americans who have rented a vehicle in the past year, 35% report they have used ride-hailing—services from companies such as Uber Technologies Inc. and Lyft Inc.—to replace rental during that same period.  Moreover, of those consumers aware of ride-hailing but who have not yet switched, nearly half (48%) say they would if the cost of ride-hailing falls to 20% below the cost of renting--which the AlixPartners report says is highly likely once autonomous-vehicle “robotaxis” hit the market in volume, with some being launched as soon as next year according to press reports.

“With the ever-growing acceptance of shared mobility and, especially, the revolution coming in autonomous vehicles, including in self-driving taxis, the traditional car-rental industry could be facing an existential crisis,” said Mark Wakefield, global co-head of the Automotive and Industrial Practice at AlixPartners.  “Rental companies need to act quickly to deal with the massive disruption ahead, and act not just on performance improvements but also on partnerships and even entire business models.  Time is not on their side.”

The AlixPartners survey also finds that a whopping 83% of car-rental consumers rate their overall experience with ride-hailing services as “very positive” or “somewhat positive.”  That compares with just 72% who rated traditional car-rental services that way.  The survey also finds that the biggest frustrations consumers have with traditional car-rental are: the laborious rental process (cited by 35% of respondents), high add-on charges (cited by 34%) and limited vehicle choice (cited by 20%).  Survey results also indicate that most of these frustrations are, or can be, addressed by ride-hailing.  For instance, 49% surveyed said one of their top-three reasons for liking ride-hailing is the ease of services from an app.

“Results from our survey suggest that the $30-billion US car-rental industry is already undergoing a tectonic shift, with boundaries not just blurring but being obliterated between car-rental and ride-hailing and other forms of new mobility,” said Arun Kumar, a director in the Automotive and Industrial Practice at AlixPartners and a co-author of the report. “The companies that survive this shift will be those that act now to transform themselves to be relevant in a world which seems to much prefer simply clicking on an app than standing in line at the rental counter.”

The AlixPartners survey also finds that—despite attempts at brand-positioning by various companies in the rental-car industry over the years—consumers’ rating of their experience with what the industry generally considers “premium” and “mid-tier” brands aren’t much higher than with “value” brands—and in some cases are lower. In fact, according to the survey, on a scale of 1 to 5, with 1 being “very negative” and 5 being “very positive,” only 0.5 points separated the highest-ranked brand of the 17 largest rental-car companies and the lowest-ranked. And that highest-ranked brand wasn’t even a “premium” one.

However, the survey also contains some challenges for the ride-hailing industry.  Only 18% of those surveyed currently say they’re willing to purchase a ride-hailing subscription for a set number of rides—thought by many to be that industry’s preferred business model.

About the Study

The Future of Cars for Hire: An AlixPartners Consumer Survey and Report was fielded May 19 to May 23, 2018 and surveyed 2,008 U.S. adults 18 and older who had rented a vehicle in the previous 12 months.

About AlixPartners  

In today’s fast-paced global market, timing is everything. You want to protect, grow or transform your business. To meet these challenges, we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication, and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters