Jan 2006

The 9 months to September 2005 have revealed significant growth in the South African car rental industry, with rental day (volume) growth at 14% up on 2004. More significant is the rental day growth for the third quarter to September 2005, which ran at an average of 21% as a result of higher than normal growth in the foreign inbound and local business travel segments. The regions with the highest car rental day growth were those of Gauteng, KwaZulu Natal and the Free State, due mainly to longer a length of rental.

The current high growth around the 20% level is expected to continue throughout summer, taking the projected figure of billed rental days to over nine million – some 16% up on 2004. We expect this high growth level to taper down to the lower teens as we approach winter in 2006 and an overall growth projected for 2006 is expected to be around the 15% level, which is excellent on top of a 16% figure for 2005. Growth at these high levels has not been experienced since the opening up of the markets in the mid-1990s and car rental operators are expanding their operations and fleets to keep abreast of these exciting levels of demand.

While the volume growth is very good, this has not necessarily translated into similar levels of revenue growth. This is due to the competitive nature of this industry, where the eight major brands continue to hack away at rates for some gain in their respective share of the market.

One would imagine that in these times of high demand and with the prominent role played by car rental in the transport arena (as compared to Europe where this industry competes with tube trains, taxis and a reliable public transport infrastructure), the much-needed rate increases would be easier to implement. Not so, with the result that the rate yield has continued to decrease, making car rental cheaper by 11% compared to last year and rates now at the same level as those in 2002. This indicates that the industry is still highly competitive and is passing the benefits of positive margins generated by “low” interest rates, stable vehicle prices and higher fleet utilization over to the consumer.

As the car rental industry’s rates are sensitive to the cost of finance, rate increases will, however, be driven upward, should the expected interest rate hike/s come into play during 2006. Having said this, it remains to be seen whether the increases will be significant and how much the competitive forces will allow the rates to increase by. All in all, consumers will continue to reap the benefits of low car rental rates for the next year. However, with demand high and fleet utilization at the 80% level, to avoid those sell-out situations that will arise throughout the summer season, the booking your vehicles well in advance is advised.