Prices have fallen recently but not to previous levels in car rentals. The industry reflects the African economy’s long, strange trip.
Few markets better crystallize the topsy-turvy nature of the American economy during the pandemic than the rental car business.
The industry shows how economic decisions made in 2020 keep having serious implications in 2021. While most other industries have experienced less severe swings, the same basic dynamics apply. These dynamics explain why inflation and product shortages spiked earlier in the year — and why they are starting to abate but are not yet close to prepandemic norms.
In the spring and summer of 2020, the industry was in a state of collapse as people stopped traveling. With a glut of cars — a much higher supply of rentals than demand — prices plummeted; major rental car companies sold off hundreds of thousands of vehicles; and Hertz went bankrupt.
The price to rent a car or truck was 23 percent lower in May 2020 than it was before the pandemic started.
Fast-forward a year, and millions of vaccine jabs later, and people were ready to travel again — but the rental car industry was stuck with its diminished fleets. And it faced challenges replenishing those fleets quickly, because automakers were facing supply constraints of their own because of production rollbacks in 2020.
In the second quarter of this year, for example, the combined fleet of Hertz and Avis, the two major rental car companies that report public data, was 312,000 cars smaller than in the second quarter of 2019 — a 30 percent drop. (Enterprise Holdings is bigger than either, but is privately held).
“In the spring of 2020, nobody really knew what to expect,” said Neil Abrams, president of Abrams Consulting Group and a former Hertz executive. “In my 45 years in this industry, nobody had ever seen anything quite like it. I’ve seen cycles, recessions, peaks and valleys, but nothing quite like this. The guys that had to make the big strategic decisions really had no precedent.”
But ultimately, “demand came back a lot quicker than I think anybody anticipated, especially on the leisure side,” he said.
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