Car rental

Back to the future for car rental as VW eyes Europcar

Reports dating back to the middle of last year that Volkswagen were interested in acquiring French car rental company Europcar appears to have come true with news that a consortium, including VW, is on the verge of closing. submit an offer worth $ 3 billion to the shareholders of the rental company. .

On the surface, such a move deep in a pandemic as the rental car industry has taken a massive hit (Hertz’s U.S. subsidiary last year filed for Chapter 11 protection, not l ‘let’s not forget) due to the severe reduction in leisure and business travel would seem risky. .

But car rental companies are clearly struggling assets right now and this presents an opportunity as the assets are available below normal market value. Since the start of the pandemic, Europcar’s share price had more than halved before the recent price spike induced by speculation around VW’s supply. In addition, travel will return to a certain degree of normalcy in the future and the rental car industry will have a more optimistic outlook.

Most important, however, are the long term trends in the automotive industry towards changes in personal mobility and electrification.

For a vehicle manufacturing company, there is always the obvious appeal in such an acquisition of having a captive customer ready to go with a huge fleet of vehicles to supply. Indeed, for several years, GM held a significant stake in Avis. Previously, between 1926 and 1953, it owned Hertz rental cars, with rival Ford becoming the owner of Hertz between 1987 and 2005. VW itself owned Europcar between 1999 and 2005. Each time, the aforementioned companies sold their operations. rental to focus on their vehicle manufacturing business; the automotive industry’s equivalent of the politician’s quick card to “spend more time with the family”.

A good question for OEMs these days is what constitutes “family”. The business is changing at a rapid pace. Most of the major OEMs no longer want to be seen as mere car manufacturers, they are all busy repositioning themselves as mobility companies. They are eager to take consumers’ money every step of the way. Whether it’s ridesharing, ridesharing, subscription services or, dare I say it, the old-fashioned approach of taking a consumer’s money from the dealership through ‘a simple property. Europcar’s infrastructure could prove invaluable for the deployment of future mobility services. For example, VW could see possibilities for future synergies with well-located Europcar rental stations, which could serve the VTC fleets. If autonomous cars arrive on the market in city centers and geo-fenced airports and major motorways, Europcar stations could become very attractive bases, perfectly positioned. It’s a very long way to go, but VW could see other possibilities for Europcar assets and the brand that could also adapt well to VW in the medium term.

There are other great things about owning a car rental business for an automobile manufacturer. There is also the daily rental channel tool. An OEM can manage the fleet for the larger business needs at the retail level, managing the flow of vehicles from the rental fleet to the used car market, which impacts residues and the attractiveness of the new car offer. Residual value management is particularly beneficial for an OEM’s captive financial arm and the bottom line boost that smart tailings management can have. Likewise, it is an available channel to move products when needed (inventory management, or to move the volume of a model line at the end of production, for example).

Moreover, these days it is an effective lever to pull when an OEM has an eye on the CO2 emissions of the fleet, and the judicious release of low emission vehicles into the fleet will have clear benefits. Likewise, a large rental fleet can be used as a test bed for electric vehicle technologies, real-world ADAS, and connected car data collection.

In this diagram, owning – or having a significant interest in a rental car company – is a natural evolution as OEMs become more vertically integrated downstream. As always, aside from previous rental car getaways from GM, Ford and VW, we have also been here in the auto industry before. In the late 1990s and early 2000s, then-Ford CEO Jac Nasser instituted a cradle-to-grave strategy that saw Ford acquire a multitude of downstream companies to access revenue. vehicles for life. . When Nasser was dismissed as CEO, the various holdings were unwound so that Ford could focus on his heart or “family”.

Overall, a car rental company isn’t a bad tool to have in the gun shop and it hasn’t been a bad tool in the past either. VW’s proposed new foray into the rental car business looks a lot like a case of back to the future.

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