Tina Bellon

(Reuters) – The Western $100 billion rental car market is thriving after a lucrative pandemic. Chinese-made cars are now poised for a prominent role.

A European executive believes that the electric transition will see more cars being made by Asian manufacturers than they were previously, despite their dominance in America and Europe.

Olivier Baldassari (group chief countries, operations officer, Europcar) said that “historically, American and European producers had an advantage. But the shift to electric is reshuffling their cards.”

According to him, electric cars made by Asian and Chinese manufacturers were similar in quality to Western models. He cited Great Wall Motors Ora line as an example, however, they generally have lower prices.

Small savings can be significant when renting a car. This industry buys millions of vehicles each year, a tenth in all of the new automobiles in the United States.

The sector’s companies have always resisted the urge to electrify due to low demand for electric vehicles (EVs). Customers are worried about losing power and this has hampered their ability of attracting new customers.

However, analysts believe now is the right time because companies have bolstered their pockets with huge profits from a pandemic which emptied airports and public transportation and resulted in more people holidaying closer to home.

According to American Car Rental Association, in the United States, car rental companies earned record-breaking monthly revenues of $1,320 per unit in 2021. This compares with an average of $1,000 before the pandemic.

“In the past, companies have kind of stuck their head in the sand,” said Nick Mountfield, associate partner at OC&C Strategy Consultants, which advises rental car companies, said about electrification. We are now seeing people saying that they will have to take action and make plans.

Graphic on U.S. rental fleet: https://tmsnrt.rs/34PGDVK

Graphic on U.S. rental car revenue: https://tmsnrt.rs/3JHCORx

WATCH HOW YOU SPEED

Hertz, a pioneer in the automobile rental business, announced last October that it would purchase 100,000 cars from Tesla (NASDAQ) – putting pressure on its competitors to outline transition plans.

Europcar in France has meanwhile pledged 20% to its electric fleet or low emission hybrid fleet by 2024. That’s up from 3% currently. If it wants to bring its fleet back to 350,000 pre-pandemic, it will have to invest in 70,000 cleaner cars over the next 2 years.

The pandemic caused rental firms to liquidate their vehicles and they have been unable to recover volumes.

Baldassari claimed that Europcar was purchasing EVs more frequently from Great Wall Motors (SAIC Motor), Polestar and Polestar. Polestar is owned by China’s Geely Cars. But it was also buying from other traditional partners such as Volvo Cars. Renault Stellantis and (PA:).

However, the Chinese strategy of the company could change if German automaker Volkswagen AG (OTC) closes its deal to purchase the company during the second quarter.

Each industry player is moving at a different pace, and each one makes their own calculations depending on the markets.

Enterprise Holdings has a cautious approach to the United States where customers want SUVs and pickups that are not yet electrified. Public charging infrastructure is lagging behind much of Asia or Europe.

Enterprise’s Orlando airport fleet – the largest location for consumer rentals – requires 25% of its daily electricity, according to Chris Haffenreffer, assistant vice president of Innovation.

Haffenreffer claimed that there are currently several thousand EVs at the organization in North America. This includes a number from Tesla, Nissan, Hyundai (OTC), Kia, Kia, Polestar and Kia. Although the company claimed it was in touch with all major automakers around the world, there are no immediate plans for increasing that number.

“At an extremely high level we want to allow our consumers to direct us as regards what they need,” he said. Since we’re still at the beginning stages of this transition, many car rental firms have adopted a wait and see approach.

Graphic on U.S. industry vehicle purchases: https://tmsnrt.rs/3gXAVnj

FOOTOLD IN THE WEST

Gasoline-powered vehicles will continue to be the mainstay of purchase for many years due to their rapid change rate and lengthy timelines for fleet overhauls. According to global automakers, electric vehicles will make up at 40% of all sales by 2040.

However, the change could have a significant impact on the fortunes Chinese carmakers in Europe. This is a competitive market with many players and a lot of brands.

They have fought with the perception over years that China’s cheap mass production could make it harder to compete with China on quality. These arguments have been challenged by a new reality, where top Western carmakers such as Tesla and BMW now make cars in China. The country is an auto industry powerhouse with the largest market in the world and a technological leader.

Great Wall Motor, one Europcar supplier, will likely launch their Ora Cat compact electric vehicle in Europe this year. It is priced at approximately 20,000 euros (22,260 USD). The range is around 250 miles (400km) and joins an increasing number of Chinese manufacturers of EVs trying to succeed on the continent.

Chinese manufacturers using the rental channel to establish brand awareness and increase sales volumes would follow a playbook Kia and Hyundai used in the 1990s to gain a foothold in Western markets, said Mountfield at OC&C Strategy.