US car sharing companies sell fleets due to pandemic

12 months ago

American car rental companies, faced with severe economic hardship during the coronavirus pandemic, began selling their gigantic car fleets. According to CNN, following the recent bankruptcy announcement of the American division of Hertz Corporation, the world’s largest car rental player, other leaders in this segment, including Avis and Enterprise, will face similar problems. The Russian market is waiting for the same scenario: the revision of leasing contracts and the entry into the market of used cars of thousands of ex-rental cars.

The main reason for the sharp decline in demand for the services of rental companies lies in the cessation of international passenger air traffic due to the outbreak of COVID-19. In March, April and May, this circumstance left the car rental desks completely empty at the largest airports in the world. Considering that it is in the air harbors around the world that such services generate 2/3 of their income, the collapse in the number of bookings led to a sharp decrease in revenue. On the other hand, the epidemiological crisis that erupted in the USA and other countries provoked the introduction of quarantine and severe restrictions on the movement of citizens. And such an “internal” lockdown worsened the situation in the car rental markets even more.

The combination of these factors and undermined the financial position of Hertz – founded in 1918 in Chicago and until recently, the leading car rental office in the United States with a 10-thousand network of branches around the world. As a result, last Friday, her leadership filed a reorganization petition with the Delaware State Court in accordance with Chapter 11, which provides for bankruptcy protection. It will affect the North American representative offices of the company and will not apply to Europe and franchised structures.

This critical situation has already led to the refusal of the leading operators of the American rental market to buy new cars for the current update of their fleets. If in normal times in the US market such purchases amounted to about 1.7 – 1.9 million cars annually, then in the current situation such figures can be forgotten. So, the main competitor of the bankrupt Hertz – Avis announced a reduction in the volume of purchased cars immediately by 80 percent.

Moreover, the giant fleets of rental cars that were out of work will soon go on a massive sale in order to cover the accumulated debts of companies. According to experts, in the coming weeks, about 1.5 million of these unclaimed “iron horses” will be put on the American market for used cars.

Moreover, the process of large-scale “drain” of such assets began in March, when Hertz sold 41 thousand of its cars in America and another 13 thousand in Europe. At the same time, Avis also greatly reduced its idle fleet, selling 35 thousand units.

In this situation, the only potential beneficiaries from the deplorable state of affairs at the leading rental services in the world are buyers of used cars. They can count not only on large discounts, reaching up to 15 percent of the market value, but also on zero down payment, as well as installment payments. At least, this is how things are in the decimated US car market, the Consumer Report magazine said.

In Russia, the situation is likely to follow a similar scenario. “The rental industry is one of the most affected by the coronavirus pandemic. Along with hoteliers and restaurateurs, we do not expect a quick recovery in our market and a sharp return to previous volumes,” said Vladimir Emelyanov, representative of the Russian division of Hertz, to RG. According to him, before the start of the COVID-19 epidemic in Russia and the introduction of restrictions on the movement of citizens, the revenue of car rental companies from transactions with private individuals ranged from 60 to 95 percent, and corporate customers held a much smaller share.

The interlocutor of RG estimated the general decline in revenues in the sector at 80 percent, which has already forced the vast majority of domestic car lessor companies to review their leasing contracts and cut back on plans for purchasing new cars made up in January.

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