Introduction:
In
April 2018, two companies, Ekar and Udrive were awarded contracts by the Dubai
Road and Transport Authority for launching their ride sharing startups that
allow users to share rides paying by the minute. Udrive has 70% of the market as of now. The
introduction of ride sharing has allowed consumers to avail a larger variety of
cars, instantaneous transport on demand and the comfort of travel in a car, all
without having to bear the expense of purchasing or servicing a car. Although car rental market had
a way to minimize the purchase of cars by allowing consumers to rent cars on a
required basis, the high cost of renting a car for a day from a car company had
led to an inverse effect with consumers. The increased need for rental cars
became a dependency only for travelers. The growth of the market has been due
to the increasing needs of business and leisure travelers. This was the major
purpose of renting a car, to have it available when you need to travel anywhere,
anytime.
Ride
Sharing: March 2009,
pegged the launch of Uber , the world’s largest ride sharing company, which was
created as a solution to the issues of car rental allowing customers to order a car
for their travel based on need for which the car would arrive in a few minutes
. The cost of travel would be including everything required. Since then there have been petitions and
protests by taxi drivers in multiple countries asking to ban apps like Uber
although there has been regional adoption of the Uber business model in many
countries as well. The advent of applications like Uber led to a major hit in
the business of the taxi market. And today, ride sharing as a whole poses a
threat to the rental car market. The largest rental car company in the US,
Enterprise car rentals, was losing significant business due to the introduction
of Turo, an app that allows users to list their own cars to be rented to make
income and also allows users on the app to find their dream car to rent or to
finance a new car. The point of the app is connecting car owners to people in
need of a car just as Uber connects people in need of a car ride to people
capable of providing one. The usage of applications like these has led to a
major problem for rental car companies. Uber itself exists in 72 countries as
of March’2018. The availability of cars allows most business and vacation
travelers the opportunity to avail a ride on demand by ordering a car for a
trip with a driver and ensuring that there is no further need for the car. The
only time this is an issue is if the car is needed to wait for the customer or
if there is luggage that needs to be stored and hauled around. Usually, in
business travel especially, there is a very minimal need for luggage to be
carried around allowing most travelers to book an Uber between destinations for
business travel and for a majority of vacation travel purposes as well. Hence
the need of a rental car is not as high as before. Multiple car rental companies like Hertz and
Avis have been constantly losing business due to the intrusion of Uber in the
car travel market. Although the effect is not major yet, there is an expected
trend that companies like Uber will become a major substitute to travelers who
feel the cost of renting a car is too high to be justified as it is already
happening with premium travelers and car rental is virtually inexistent among
locals, there seems to be a growing threat to the car rental market from the
ride sharing market
Conclusion:
The
companies that use ride sharing are taking away a portion of business for short
term car rentals. The portion is expected to increase over time. The adoption
of strategies such as gamification, increasing customer service, Real time GPS
positioning and system automation are efforts made in improving operations and
customer experience but cannot be adequate to win consumer confidence if the
cost and satisfaction factor is not improved.
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Ankur Gupta, Head
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