Car Rental Shortages: Why It “Hertz” To Rent A Car

An April 8^th, 2021 Washington Post article “Why your next rental car might cost more than a plane ticket” reported car rental shortages and that renting a car is no longer a simple process of speed and convenience. In fact, and based on the article’s title, renting a vehicle is a painful experience for almost every traveler—now you get the Hertz pun—although the problem isn’t just with that company alone.

The reason for the shortage—at least in part—goes back to the early days of the pandemic when strict travel restrictions were put in place to curb the spread of the COVID-19 virus. The imposed measures meant that there were a lot of cars taking up space in rental company parking lots. With no immediate end (or traveling customers) in sight, companies “shed hundreds of thousands of their cars.”

This “car shedding” means that with the resumption of travel, there is a lack of vehicles available to meet growing customer demands. As a result, what is available is very expensive. Or, as one frustrated traveler put it, “It’s great that I got this $50 airfare, but the rental car is going to cost me 10 times as much.”

Rebuilding the Fleet

The obvious question that will come to mind is why can’t car companies rebuild their fleet fast enough to meet demand?

The problem is a global shortage of semiconductor chips that is bringing automaker production to a halt. What’s worse is that there is no immediate end in sight.

The shortage is reportedly due to “pandemic-related production issues and a surge in demand for electronics,” and it is hitting some countries harder than others. For example, in Canada, vehicle production hasn’t been this low in 40 years, going back to the recession in the early 1980s.

The situation isn’t much better in the United States as CNN Business reported that GM would be “shutting down production at most of its plants in North America.”

With COVID cases surging where many chip manufacturers are based, such as Southeast Asia, the situation is likely to worsen before it gets better.

Finding the Road Through Car Shortages

They say that necessity is the mother of invention, and the car rental business is no exception for outside-the-box creative thinking.

Take Turo, the “world’s largest carsharing marketplace.”

Turo is the Airbnb of the auto world, where owners can rent out their personal vehicles to travelers. According to Turo CEO Andre Haddad, the company’s “hosts,” as he calls them, are seeing their car rental businesses boom as travelers scramble to secure transportation.

Based out of San Francisco, the “peer-to-peer carsharing company” allows car owners to “rent out their vehicles via an online and mobile interface in over 56 countries.”

Given the cost of renting someone’s personal vehicle starting as low as $25 per day through Turo or paying $100 and higher through a car rental company, the choice—at least in the immediate future—is obvious.

For the longer term, and similar to Uber’s infringement and lasting impact on the taxi business, one can only wonder what the traditional rental car industry will look like when the car shortage is no longer an issue. And also, how the current model of car rental services will continue to cope through this shortage.