The automotive industry

Market Review

The car rental industry is a multi-billion-dollar sector in the US economy. The US industry segment is about $ 18.5 billion a year. Today, there are about 1.9 million rental cars serving the segment in the US market. In addition, there are many rental agencies besides the sectoral leaders who subdivide total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the automobile automotive industry is heavily consolidated, which naturally puts potential newcomers at a disadvantage as they face large costs for materials with reduced economies of scale. Moreover, much of the profit is generated by several companies, including Enterprise, Hertz and Avis. For the fiscal year 2004, the company generated $ 7.4 billion of total revenue. Hertz was second with about 5.2 billion dollars and Avis with 2.97 dollars.

Level of integration

The automotive rental industry is in a completely different environment than five years ago. According to Business Travel News, cars are hired until they have accumulated 20,000 to 30,000 miles until they are transferred to the used automotive industry while the 12,000 to 15,000 miles range five years ago. Due to the slow growth of the industry and the narrow profit margins, there is no imminent threat to the lag in the industry. Indeed, among the players in the industry, only Hertz is vertically integrated through Ford

Scope of competition

There are many factors that shape the competitive landscape of the automotive industry. Competition comes from two main sources across the chain. Due to the end of the holiday consumer's spectrum, competition is fierce not only because the market is saturated and well guarded by the leader in the Enterprise industry, but competitors are in a disadvantaged position, along with smaller market shares, as Enterprise has established a network of dealers more than 90% from the leisure sector. From the corporate segment, on the other hand, competition is very strong at airports, as this segment is under strict control of Hertz. Since in recent years the industry has suffered a massive economic downturn, it has improved the scale of competition in most surviving companies. From a competition point of view, the rental car industry is a military area, as most rental agencies, including Enterprise, Hertz and Avis among the major players, are engaged in a battle of the strongest


most companies have worked to increase the size of the fleet and increase the level of profitability. Currently, the company with the largest fleet in the US has added 75,000 vehicles to its fleet since 2002, helping to increase the number of facilities to 170 at airports. Hertz, on the other hand, added 25,000 vehicles and expanded its international presence in 150 counties, compared with 140 in 2002. In addition, Avis increased its fleet from 210,000 in 2002 to 220,000 despite the latest economic dislike. In the years after the economic downturn, although most companies in the industry were struggling, Enterprise among the leaders in the industry was steadily growing. For example, annual sales reached $ 6.3 in 2001, $ 6.5 in 2002, $ 6.9 in 2003, and $ 7.4 billion in 2004, which translates into a growth rate of 7.2% per year over the last four years . Since 2002, industry has begun to recover in the sector as total sales have risen from 17.9 billion to 18.2 billion dollars in 2003, according to industry analysts the better days of the car industry to lend rent is still ahead. Over the next few years, industry is expected to benefit from an accelerated growth of $ 20.89 billion every year after 2008, "which is equivalent to a CAGR of 2.7% [increase] over the period 2003-2008 [19659002] Dissemination

Over the past few years, the automotive car industry has made great strides to facilitate its deployment. Today it has around 19,000 hiring locations, giving about 1.9 million rental cars in the US. car rental locations in the US, strategic and tactical approaches with is taken into account in order to ensure proper distribution throughout the industry.The distribution takes place within two interconnected segments.In the corporate market the cars are distributed to the airports and the hotel environment.In the leisure segment on the other hand, in agencies that are conveniently located within most major roads and metropolitan areas [19659002] In the past, car rental managers relied on feelings or intuitive assumptions about making and decisions about how cars have in a fleet or the level of use and performance standards of preservation of certain vehicles in a fleet. With this methodology, it was very difficult to maintain a level of equilibrium that would satisfy consumer demand and the desired level of profitability. The distribution process is relatively simple across the industry. Initially, managers must determine the number of cars to be on a daily basis. As a very tangible problem arises when there are too many or not enough cars, most car rental companies, including Hertz, Enterprise and Avis, use a pool that is a group of independent tenants who share a fleet of vehicles. (19659002) Market Segmentation

Most companies in the whole chain make a profit based on the type of cars that are sold to the most. The car is categorized as economical, compact, intermediate, premium and luxury. From the five categories, For example, the economic segment alone is responsible for 37.7% of the total revenues in the market in 2004. In addition, the compact segment accounts for 32.3% of the total revenue and the other remaining categories cover the remaining 30 % for the segment and the US

Historica l levels of profitability

overall profitability of the automotive industry has shrunk in recent years. Over the last five years, industry has fought just like the rest of the tourism industry. In fact, between 2001 and 2003, the US market experienced a modest decline in profitability. In particular, revenue declined from $ 19.4 billion in 2000 to $ 18.2 billion in 2001. Subsequently, total industry revenue declined further to $ 17.9 billion in 2002; an amount that is slightly higher than $ 17.7 billion, which is the total revenue for 1999. In 2003, the industry saw a barely noticeable increase, resulting in a profit of up to $ 18.2 billion. As a result of the economic downturn in recent years, some of the smaller players, who were heavily dependent on the airline, made many reorganizations of the strategy as a way to prepare their companies to cope with potential economic shocks that could bypass the industry. 2004, the economic situation of most businesses has gradually improved throughout the industry as most rental agencies have returned much higher profits than previous years. For example, Enterprise earns $ 7.4 billion; Hertz returns revenue of $ 5.2 billion and Avis with $ 2.9 billion in revenue for the fiscal year 2004. According to industry analysts, the automotive industry is expected to increase by 2.6 percent over the next few years

Competitive rivalry among sellers

There are many factors that stimulate competition in the automotive industry. Over the last few years, fleet expansion and increased profitability have been at the heart of most automotive companies. Enterprise, Hertz and Avis among the leaders are expanding both in sales and in the fleet. In addition, competition is booming as companies are constantly trying to improve their current conditions and offer more to consumers. The company almost doubled its fleet size from 1993 to approximately 600,000 cars today. As the industry operates with such narrow profit margins, price competition is not a factor; however, most companies are actively involved in creating value and providing a variety of amenities from technological gadgets so they can even be rented to satisfy customers. Hertz, for example, integrates its Never-Lost GPS system into its cars. On the other hand, Avis uses its OnStar and Skynet to better serve the customer base and offers free weekend rentals if the customer rents a car for five consecutive days. In addition, the automotive consumer base of the car rental is relatively low, excluding the cost of switching. Conversely, rental agencies face high fixed operating costs, including rental of property, insurance and maintenance. Hence, rental agencies considerably pricing car rentals there only to reimburse their operating costs and adequately meet the requirements of their customers. Moreover, as in recent years industry has experienced slow growth as a result of economic stagnation, which has led to a huge decline in both corporate travel and leisure, most companies, including industry leaders, are aggressively trying to re-orient their businesses , gradually reducing the level of dependence of the airline and restoring their position as a recreational sports area

The potential entry of new competitors

Entry into the rental industry of new second-hand vehicle seriously disadvantages. Over the last few years, following the economic downturn in 2001, most large rental companies have begun to increase their market share in the tourism industry as a way of ensuring stability and reducing the level of dependence between the airline and the automotive industry. While this trend has led to long-term success for existing businesses, it has increased the competitive landscape for new consumers. Because of the power of competition, existing companies such as Enterprise, Hertz and Avis are carefully following their competitive radar to predict Sharpe attacks against new entrants. Another entry barrier is created due to the saturation of the industry

For example, Enterprise has won the first tunnel advantage with its 6,000 facilities by saturation of the leisure segment, thus not only placing high limitations on the most common channels distribution, but also high resource requirements for new businesses. Today, Enterprise has a space for renting within 15 miles of 90% of the US population. Due to the network of dealers that the Enterprise has created throughout the country, it has become relatively stable, more resilient to the recession and, above all, less dependent on the airline than its competitors. Hertz, on the other hand, uses the entire spectrum of its 7,200 stores to secure its market position. In principle, the emergence of most of the industrial leaders in the leisure market not only leads to rivalry but also changes directly with the level of complexity of entry into the automotive industry

The substitute threat

There are many substitutes available for the automotive industry. From a technology point of view, hiring a distance car for a meeting is a less attractive alternative than video conferencing, virtual teams and collaborative software that the company can immediately set up a meeting with its employees from anywhere in the world at cheaper costs . In addition, there are other alternatives, including cabin taking, which is a satisfactory substitute for quality and replacement costs, but may not be as attractive as a rental car for one day or more. While public transport is the most cost-effective alternative, it is more expensive in terms of the process and the time it takes to reach the goal of one. Finally, as flying offers convenience, speed and efficiency, it is a very attractive substitute; but this is an unattractive alternative to the price of car hire. In the business segment, car rental agencies have more protection against substitutes, as many companies have introduced travel policies that set the parameters of car hire or the use of a substitute is the best way to act.

According to Tracey Esch, director of marketing operations, her company hires cars up to 200 miles before considering an alternative. In principle, the threat of substitution is relatively low in the car rental sector, as the effects that substitute products do not pose a significant risk of profit erosion across the industry

The power of contracting suppliers

the automotive industry. Due to the availability of substitutes and the level of competition, suppliers do not have a great deal of influence on the terms of the rental car. Because rental cars are usually bought in bulk, car rental agents have a significant impact on the terms of the sale as they have the ability to play one supplier against another to reduce the sale price. Another factor that reduces the power of the supplier is the lack of switching costs. This means that buyers are not affected by purchasing from one supplier to another and, most importantly, the change of products to different suppliers is hardly noticeable and does not affect the choice of consumer leasing

. Purchasing power of buyers

While the leisure sector has little or no power, the business segment has a significant impact in the automotive industry. An interesting trend, which is currently developing throughout the industry, forces car rental companies to adapt to the needs of corporate travelers. This trend significantly reduces the power of suppliers or rental companies. power and increases corporate purchasing power, as the business segment is terribly price-sensitive, well informed about the price structure of the industry, buys in bulk, and uses the internet to charge lower prices. Holiday buyers, on the other hand, have less impact on rental terms. Since tourists are generally less price-sensitive, smaller purchases, or fewer purchases, they have a low contracting power.

Five Forces

Today the automotive industry is in a completely different environment than five years ago. From a competition point of view, the revolution of the five forces around the automotive industry exerts strong economic pressure, which greatly reduced the competitive appeal of the industry. As a result of the economic downturn in recent years, many companies have moved in particular from Budget and Vanguard Group because their business infrastructure has succumbed to the instability of the competitive environment. Today, very few companies, including Enterprise, Hertz and Avis, return a slightly higher average revenue than the rest of the industry. Realistically, the car rental sector is not a very attractive industry because of the level of competition, barriers to entry and competitive pressure from substitute companies

Strategic mapping of groups

A moderately concentrated sector has a clear hierarchy in the automotive industry. From an economic point of view, there are differences from a number of dimensions, including the revenue, the size of the fleet and the size of the market that each firm holds on the market. For example, Enterprise dominates the fleet-sized industry of about 600,000 vehicles, along with market size and profitability. Hertz ranks second with its market share and fleet volume. In addition, Avis is third on the map. Avis is one of the companies that have problems recovering their earnings margins before the economic downturn. For example, in 2000, Avis returned revenues of approximately $ 4.23 billion. Over the next few years, since 2000, Avis's revenues have been significantly lower than in 2000. As a way to reduce uncertainty, most companies are gradually reducing the level of dependence on the aviation industry and the emergence of the leisure market. Тази тенденция може да не е в интерес на Hertz, тъй като нейната бизнес стратегия е сложно свързана с летищата.

Ключови фактори за успех

Има много ключови фактори за успех, които водят до рентабилност в цялата индустрия за отдаване под наем на автомобили. Използването на капацитета е един от факторите, които определят успеха в отрасъла. Тъй като фирмите за отдаване под наем изпитват загуба на приходи, когато има твърде малко или твърде много автомобили, които се намират в техните партиди, от първостепенно значение е ефективното управление на флотите. Този фактор за успех представлява голяма сила за индустрията, тъй като намалява, ако не напълно елиминира евентуално недостиг на коли под наем. Ефективното разпределение е друг фактор, който поддържа индустрията печеливша. Въпреки положителната връзка между размерите на флота и нивото на рентабилност, фирмите непрекъснато увеличават размера на флота си, поради конкурентните сили, които обграждат индустрията. Освен това удобството е един от най-важните признаци, с които потребителите избират фирмите за отдаване под наем. Това означава, че потребителите на коли под наем са по-склонни да наемат автомобили от фирми, които имат удобни места за отдаване под наем и отпадане. Друг ключов фактор за успех, който е често срещан сред конкурентните фирми, е интегрирането на технологиите в техните бизнес процеси. Чрез технологията например компаниите за автомобили под наем създават начини да отговорят на потребителското търсене, като наемат кола под наем много приятно изпитание, като добавят удобството на онлайн наемането сред другите алтернативи. Освен това, фирмите са интегрирали навигационните системи заедно с пътната помощ, за да предложат на клиентите усещането при наемането на автомобили.

Атрактивност в индустрията

Има много фактори, които оказват влияние върху привлекателността на автомобилната индустрия. Тъй като индустрията е умерено концентрирана, тя поставя новите участници на пазара в неравностойно положение. Това означава, че неговата ниска концентрация представлява естествена бариера за навлизане в отрасъла, тъй като позволява на съществуващата фирма да предвиди остри репресии срещу нови участници. Поради рисковете, свързани с навлизането на индустрията сред други фактори, това не е много атрактивен сектор на пазара. От гледна точка на конкуренцията, пазарът на свободното време е 90% наситен поради активните усилия на предприятието да доминира в този сектор на пазара. От друга страна, летищните терминали са силно охранявани от Херц. Реалистично казано, влизането в сектора предлага ниска рентабилност спрямо свързаните с него разходи и рискове. За повечето потребители главните определящи фактори при избора на една компания спрямо друга са цената и удобството. Поради тази причина фирмите за отдаване под наем са много предпазливи по отношение на определянето на ставките си и това обикновено налага дори на големите играчи в индустрията да предлагат повече на потребителите по-малко, само за да останат конкурентни. Херц, например, предлага безжичен интернет на своите клиенти, само за да добави повече удобство към своите планове за пътуване. Avis, от друга страна, предлага безплатни уикенд специалности, ако клиентът наеме кола за пет последователни дни през седмицата. Въз основа на въздействието на петте сили, секторът за отдаване под наем на коли не е много привлекателна индустрия за потенциални нови участници на пазара.


Автомобилната индустрия за отдаване под наем е в състояние на възстановяване. Въпреки че може да изглежда, че индустрията има добри финансови резултати, все пак постепенно се възстановява в сравнение с нейното действително икономическо състояние през последните пет години. Като начин за гарантиране на рентабилността, освен търсенето на пазарни дялове и стабилност, повечето компании в цялата верига имат обща цел, която се занимава със снижаване на нивото на зависимост от авиокомпанията и преминаване към сегмента за отдих. Това състояние на движение доведе до ожесточена конкуренция сред конкурентите в отрасъла, тъй като те се опитват да защитят пазарните си дялове. От гледна точка на футуризма, все още има по-добри дни от автомобилната индустрия. Тъй като нивото на рентабилност се увеличава, аз вярвам, че повечето от лидерите в индустрията, включително Enterprise, Hertz и Avis, ще бъдат ограничени от икономическите и конкурентни бариери пред мобилността на техните стратегически групи, а новите потребители ще имат по-голям шанс да проникнат и реализират успеха


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Source by Rodrigue Monestime