DAILY RENTAL: The Big Issues
07 April 2011
How are the key areas of the environment, technology and economics affecting the world of daily rental? Hugh Hunston speaks to the leading industry figures about recent developments
Electric vehicles as a short- or medium-term commercial prospect within the daily rental sector are being greeted with underlying caution.
Although Avis UK will play its part in a pan-European pilot scheme involving 500 electric Renaults starting towards the end of this year, Anthony Ainsworth, the firm's commercial director, admits: "We have had no demand from corporate customers. But it is a matter of when, not if, for them to become more acceptable for rental."
He adds: "You can expect it to be two or three years before we start considering taking on larger numbers. Without the supporting charging infrastructure I don't see a viable commercial opportunity for mainstream rental companies."
Avis is also in talks with Nissan about the Leaf and Ainsworth says: "We are open to new vehicle types. The bottom line is the willingness or otherwise of corporate customers to pay inevitably higher rates that electric cars would attract. It is about additional capital and input costs."
Spencer King, corporate communications manager for Enterprise Rent-A-Car, admits the firm is "hesitantly excited" about EVs. It is on the verge of signing a "small contract" with an un-named manufacturer for a "handful of vehicles", which would be located at urban depots in and around London and be used for "customer education" rather than business rental.
Rob Ingram, the firm's director of business rental, says the cars will fulfil a dual role of "being environmentally beneficial and providing onboard experience when clients are driven back to offices or homes after rental cars are dropped off".
King predicts: "It is still 12 or even 24 months away before real headway. We have a responsibility to run them alongside so people can choose if they want to migrate to electric."
Hertz's general manager for strategic products in the UK and Europe, Neil Cunningham, says: "There is a lot of hot air out there about the brave new world of electric cars." Hertz, though, is planning to take a step beyond its one-year long pilot scheme, using a single Citroen Evie at £4 an hour in partnership with Camden Council, by signing memorandums of understanding with Renault, Nissan and Mitsubishi within three months. In total, 10 London-based corporate customers have been selected while the British Airports Authority is also "targeted."
Cunningham defines the provision of pool cars for shorter journeys and ad hoc use as the main initial market potential. He adds: "I would guarantee that electric will be 10% of the general rental fleet within five years. Rental rates depend on equivalent fuelling costs and, per-mile, electric should be a lot less than conventional fuels."
Ingram says firms are struggling to set up a pricing structure for EVs. "As far as rates are concerned we have no idea and are asking businesses what they expect to pay. Equally they have no idea. These rates will not be on a rate sheet on online quote for some time. It will be down to appetite."
Roddy Graham, Leasedrive Velo's commercial director, "struggled to see the value of cars with circa 100-mile range. Renters will have to pay through the nose for them, unless it was a subsidised PR thing. And even then you would have to put them on trailers to maintain range when delivering." He added: "They have not come much further than milk floats in reality until now."
Perhaps the most eyecatching green initiative a daily rental company is undertaking involves ING Car Lease.
It is offering £20 refund incentives to customers for collecting their rental cars from depots. Head of rental services, Michelle Wilson, claims the offer means the company would avoid four journeys involving collection and delivery services.
Meanwhile, Hertz has reduced BAA's pool fleet at Heathrow airport from 12 to nine Ford
Fiesta Econetics through its Connect by Hertz, a self-service pay-as-you-go vehicles system. General manager for strategic products in the UK and Europe, Neil Cunningham, claims the system increases the efficiency of managing a rental fleet through having direct communication with a dedicated corporate centre that provides booking extensions or route guidance.
On the corporate rental front, Enterprise customers can receive data tracking CO2 profiles on cars and "can set targets to avoid larger, higher-CO2 cars and shift employee driving behaviour", according to Rob Ingram, Enterprise director of business rental. "If they make savings on fuel and rental costs, then longer-term relationships are more important to us than short-term profitability.
"We also have our 20/20 programme with the target of cutting utility energy bills for the company and an overall reduction in costs, both by 20% over a five-year period. It demonstrates to core customers that we are committed to green issues."
Woking Borough Council is Enterprise's partner in a pilot car-sharing scheme called WeCar that provides alternatives to "under utilised and inefficient pool cars". Average journeys in the smaller, lower-CO2 cars is 14 miles, and although designed specifically for business users there is a personal element, particularly at weekends.
For Avis, the percentage of the firm's corporate rental fleet cars that have a sub-120g/km rating has grown to just under one-third, and commercial director Anthony Ainsworth believes specific models like VW's Bluemotion, Ford's Econetic, Vauxhall's EcoFlex are leading "real market demand".
Avis's Select Programme majors on lower CO2 cars.
Hertz, meanwhile, highlights its Green Collection, originally a retail programme but now attracting "increasing interest from corporate customers" according to Cunningham.
He explains: "It is about achieving the right CO2 level for replacement car customers and providing, say, an equivalent 100g/km model during down time to maintain the tax benefit. Some dirtier cars are much cheaper in list-price terms but extremely high from a company car tax perspective."
Avis is planning to extend its app service - which enables customers to book a car online worldwide - to Blackberries within two months.
It is also piloting its keyless On Demand technology in Paris. The system uses a smart card for booking and access round the clock. Anthony Ainsworth, the firm's commercial director, says it transmits the driver's identity, mileage covered and fuel consumed, and automatically bills the user. The trial covers 100 cars across a variety of brands, with the software and hardware not requiring a "specialist relationship" with one or two manufacturers. Avis expects a similar "robust pilot scheme" in Britain by the end of this year starting with corporate customers, who "do a lot of commuting between fixed sites".
The company already uses the bespoke Wizmap tracking technology, which optimises where rental fleet cars are on collection and delivery assignments to "make it simpler and leaner for customers and us".
Meanwhile, Connect by Hertz's app has generated "huge interest among corporate clients", says general manager for strategic products in the UK and Europe, Neil Cunningham, although he admits that despite online and apps improvements in "efficiency, functionality and traceability", the firm had not eliminated phone contact by nervous customers "making sure the booking has gone through."
Enterprise's development of its business-to-business online system can upload a company's travel policy and incorporate it into rental calculations and requirements to provide a bespoke service. Rob Ingram, the firm's director of business rental, says that this extends to advising if employees should pick a certain size of car if they are not carrying passengers, according to internal policies.
ING has introduced a PDA or hand-held personal digital assistant particularly for Europcar delivery and collection drivers. It stores images of mileage reading, damage and condition reports from the start of rental periods, plus satellite navigation applications to help rental company drivers reach destinations on time. Real-time tracking is planned for the project's second phase.
Leasedrive Velo's Roddy Graham claimed that his company has remained in the "vanguard of online systems, particularly with online booking technology". This includes bespoke websites with terms and conditions applying to individual fleet polices. Equally, data can be provided on company intranets to maintain "a secure environment and tailor-made services".
Graham does not anticipate taking the app route because his "blue-chip clientele of 60 to 70 customers knows who I am and where I am". He also disclosed that online rental bookings had reached a "ceiling" at 75% to 90% of Leasedrive's business reservations, and doubted if "we will ever bridge that final gap because corporate car rentals are frequently distress purchases. People will lift the phone because they had not planned to rent a car until circumstances intervened."
RATES AND DOWNSIZING
Daily rental rates for corporate clients have been the subject of a "steady and sustained increase", averaging between 5-10% over the past two years, according to Anthony Ainsworth of Avis UK, who predicts the trend will continue "this year and into next".
He says: "The market as a whole has moved its rates up as a consequence of rising input costs and greater focus on the segment we serve. There has been a steady and sustained increase in daily market rates. Typically that is by 5-10% per year. This is about charging more realistic daily rates for rental so we can continue to invest in the level of service customers expect."
ING's Michelle Wilson says that "negotiating really hard with our suppliers who are the rental companies means some rates have gone up by a minimal percentage and some went down. On average, standard vehicles have risen 2% and estates and automatics by between 5% and 8% due to specifically increased holding costs. LCVs have risen around 5%."
Roddy Graham of Leasedrive adds: "The market always wins and in the corporate sector rates have been quite stable over the last two or three years. There have been some relatively small rises. Some businesses slash rates to gain customers. People still argue that this sector does not make enough money and the cliche is that you can rent a Focus as cheaply as dinner suit hire for one night.
"But rental companies do just fine, thank you, or I would not be in the business. A major issue has been some of the big players who were taken over by private equity firms at the top of the market. The only way their owners can claw that money back is to slash costs or hike prices. That is against others without that high degree of leverage. Forecasting 10% rises is sabre rattling because most of my customers would not tolerate it."
Ainsworth continues his contrary view by denying there had been significant downsizing of vehicle size but conceded that the imperatives were emissions and fuel efficiency: "Corporates continue to rent vehicles of the same size and exploit more efficient, smaller displacement turbo petrol and diesel engines. By providing a robust rental policy and good management information we limit things like ancillary charges for damage, fuel bills and insurance."
But Hertz's Neil Cunningham maintains that 10% of his firm's corporate customers have "shifted down from Mondeo-sized cars to Fiestas during the past three years, missing out the Focus or its equivalent on the way down.
People renting smaller cars pay lower rates, quid pro quo: "We
have been helped by people moving from leasing to short-term rentals. They are renting rather than leasing to avoid longer-term commitments until they are confident of a genuine economic recovery."
Enterprise's Spencer King said his company would "turn off retail business to supply corporate demand", while his colleague Rob Ingram adds: "There is a shift in our longer-term rentals, one-month-or-more products which have been under-priced for some time and were artificially low."