Jan 2006
South Africa’s car rental industry has undergone significant changes over the past 30 years with the past decade seeing the most dynamic changes and competitive forces ever.
Pre-1994 …
Going back to the seventies, there were three major brands operating in South Africa, these being Avis, Hertz and Budget. In those early days, it was a case of educating potential customers to get to grips with the concept that renting vehicles was a good way to get around on business and holiday trips.
The focus was more on the business market and many negotiations were held with the Department of Transport of the day, to obtain kiosk space within the airport terminals. During the eighties, a new local brand ‘Imperial Car Rental’ was born with dynamo Carol Scott at the helm. Today, the Imperial group runs a powerful multi-brand car rental operation.
The eighties also saw much pressure brought to bear on the international brands and towards the end of that decade Imperial purchased the Hertz brand and operated it from their Imperial outlets.
The pressures of increasing parking bay and kiosk space requirements at airports continued into the 1990s. However, much relief was provided to the industry when the Airports Company of South Africa (ACSA) took control of the nine major state airports enabling greater participation and much-need best, but, at a cost.
Imperial’s acquisition of Tempest Car hire in the early nineties brought home-grown brand into the industry and while competition between all the players started to hot up, it was still under relative control with ongoing rate increases attainable.
1994 to 1999 …
With the post-apartheid ‘opening up’ of South African trade to the rest of the world and in tandem with ACSA’s keenness to open up business at the main airports across the country, the number of car rental brands and operators climbed to eight.
Hertz then returned to South Africa under its own brand. Next up was Imperial’s acquisition of Europcar which saw yet another international brand join the fray. Shortly thereafter, Combined Motor Holdings’ National/Alamo and more recently, Dollar/Thrifty, have come onto the scene. The new South Africa also saw an increase in the number of smaller independent operators in main urban areas.
Avis continued to be the largest single brand operator, with its market share fluctuating with the new arrivals. During this time, South Africa had become the new international ‘flavour of the month’. It had become a popular holiday destination and played host to the 1995 World Cup Rugby resulting in significant increases in car rental volumes. This allowed the new players to make their way into the market without too much upheaval to existing operators.
With the approach of the new millennium, however, competitive pricing for market share began to creep in.
1999 to 2004 …
During the mid-nineties, South Africa had enjoyed significant growth in tourism and as these numbers began to drop off, circa 1999, the competitive forces at work in the car rental industry increased further, limiting rate increases in a still rather high inflationary environment, come the turn of the century.
By 2000, the new brands / operators had settled and the eight main airport-based car rental operations began to consolidate their positions and drive hard for market share growth which resulted in the price-cutting and lower rate yield into 2001.
With the brief spike in interest rates in 2002, a correction to pricing was achieved in 2002 and 2003. However, as interest rates came down and new car prices effectively reduced, the price war fire flared up again and saw rate yields decreasing during 2004 and 2005.
During this period, the smaller independent operators – of which there are hundreds operating fleets ranging from five to 100 vehicles – continued to grow and are now estimated to control around 10% of the total market.
2005 and beyond …
This year has seen very torrid competition amongst car rental operators who have reduced rates to either increase or protect their respective share of the market.
Naturally, this activity has ensured that the potential profit gains from the lower interest rates since 2003 have been passed on, in the main, to the consumer. The end result is that car rental is as cheap now as it was in 2003.
Looking forward, unless significant interest rate or new vehicle price hikes come into play, the competitive forces will continue well into 2006.