How Car Rentals and Fleet Managers Can Grow in the New Era of Mobility

Future of Fleet Management ICRS 2019 Panel Recap
By: Israel Duanis, Co-Founder & CEO of Fleetonomy

A couple of months ago, I participated in an industry-expert panel on the future of fleet management. It was moderated by Chris Brown, executive editor at Auto Rental News who brought us all together Kristopher Luey from Vulog, Don Puniani from Ridecell, Don Finney from OTA Keys and myself. It was interesting to discuss some of the opportunities that often disguise as challenges in today’s rapidly changing new-mobility space.

For those of you who missed it, here is my take on the #future of fleets, the car rental industry, and the new transportation market on the way to autonomous vehicles.

Future of Fleet Management ICRS 2019 Panel

“Own the fleet, Own the future. Car rental companies buy, sell and manage more vehicles than any other entity in the world and thus, have vast experience in managing fleets.”

Chris Brown

In what ways can car rentals leverage their inherent strengths in a new era of mobility? 

There are many TNC companies out there, but they usually don’t own the vehicles. So, they do not have the same level of understanding that the car rental companies have and I believe that’s the car rental industry’s strongest advantage. The way I see it, the car rental industry can leverage their ownership of the cars themselves and vast experience in fleet management in one of three ways : 

  1. provide the assets
  2. provide fleet management best practices 
  3. provide the service as a whole 

In recent years, we have seen examples from all of the three approaches. 

When it comes to providing the assets, huge rental companies such as Avis, Hertz and FlexDrive are offering their vehicles to services such Lyft Express Drive. This allows these companies to expand their business by offering rental vehicles to TNC drivers via a 3rd party App. 

When it comes to providing fleet management services,  Avis also partnered with Waymo, the self-driving car subsidiary of Alphabet, to provide maintenance services for its fleet of autonomous vehicles in Phoenix. Avis is in charge of maintaining the vehicles, in things like charging, refueling and cleaning.

The partnership is allowing Avis “first mover” advantages in the autonomous mobility market by introducing themselves and becoming meaningful to autonomous players as well as gaining experience in understanding the dynamics of autonomous vehicles. 

And, when it comes to operating their own branded service, we see some players that are already out there and trying new initiatives such as Avis ZipCar or SIXT’s ‘MaaS by Sixt’ app.

So there’s really a lot that rental companies can do, and they are in a good position to seize these new opportunities.

According to Fortune,  an analysis of $140 billion of travel transactions over the past two years showed that 63% of previous car rental customers have minimized their spending on car rentals, resulting in almost a $3.2 billion loss for the rental industry.

Additionally,  56% of previous car rental customers ceased to acquire car rental services altogether in favor of on-demand app-based rideshare services. However, according to Epsilon-Conversant‘s report, car rentals are still retaining a loyal demographic of older customers. While 9.8M consumers still  use car rentals but don’t use rideshare services, the report says, there are still 9.4M million people who use ridesharing services, meaning there’s still a long way for ridesharing companies to go.

In the near term, how is the replacement of personal miles with shared mobility affecting car rental? 

It’s clear that there’s an ongoing trend of customers moving from rent to ride sharing services. Yes, there’s a difference in the way each generation travels, but I think it also depends on the travel use case. Long distance trips with my family, for instance, will still require renting a car. 

So the transition is here and car rental companies understand that they need to adjust in order to stay competitive. The thing is, it’s not only about competing with new means of moving from place to place. Today’s customers are expecting the traditional rental experience to be app-based, seamless, personalized and on-demand, and this encourages car rental companies not only to try and understand their place in the new mobility space but also to embrace digitalization in their day to day rental business as well.

The world is changing and transportation is transforming. As a result, we can see examples of rental companies around the world expanding beyond traditional rental models on a mission to maintain long-term relationships with their customers, stay relevant and be able to provide a unique experience. 

For example, Enterprise Car Share teamed up with Princeton to reduce traffic congestion on campus and offer students an app-based on-demand transportation option. Another good example is Hertz’s ride-hailing Initiative. Today, Hertz is channeling rental units into the ride-hailing market and their activity is planned to grow by 30% to 40% throughout 2019 according to Auto Rental News.

What technologies can car rental companies adopt today that will ensure sustainability but not necessarily require a wholesale shift to a new mobility model? 

By laying out industry relevant strategies along with making smart use of their extensive user-habit data, car rental companies are seemingly in a good position to become a big player in the mobility transformation, and they are already showing signs. In 2018 the U.S. car rental market reached a revenue record by passing $30B in annual revenues for the first time and overall revenue grew by $1.38 billion from 2017, which shows just how much potential there is for this market.

There are a lot of different technological approaches that can really help car rental companies that don’t require a wholesale shift. 

Data Driven Fleet Utilization – Predicting Demand

Utilization is a game of supply and demand. In the past few years, data, which is considered the new oil for many industries, has created tremendous opportunities to better deal with this crucial challenge. By using AI-based technology, demand for services can be predicted and provide real-time and long term insights that can help rental companies become more proactive when planning and optimizing fleet utilization. Most data sources that can affect demand are already available today such as demographics, weather, traffic, airport schedules, social events, hotel occupancy, and many others. Correlations with different data sources can vary throughout different locations or countries according to people’s behaviors, and the demand prediction models can be adjusted according to each specific scenario.

Enhanced Maintenance and Repair Efficiency

AI-based prediction models are not only crucial for predicting demand but are also useful for predicting and managing maintenance efficiently across the entire fleet. Multiple parameters can affect when a vehicle might require maintenance. Some of them have to do with fixed thresholds such as mileage or time, while others can be more difficult to analyze and address in an efficient, cost-effective manner. These include real-time fleet telematics data, collecting vehicle data during periodic checks and external data such as weather conditions and customer driving patterns. Dealing with various data sources and predicting the outcome is possible due to AI technologies, and can help fleet operators implement predictive maintenance. When maintenance is synchronized with the overall demand for service, car rental companies can maximize utilization and ensure efficient operations. For example, with the assistance of AI, car rentals can leverage one-way rentals to move vehicles towards far away from maintenance spots, while eliminating gas and driver hours that would otherwise be required.

Revenue Management

Models generated by AI can help predict vehicle depreciation and report precisely when the best time would be to de-fleet and sell assets. Additionally, AI engines can constantly comb through the entire fleet data to make sure that rent prices meet the demand for services. AI tools have the power to enhance pricing management and optimize car rental rates according to pricing goals automatically, as well as keep close track of depreciation. By utilizing AI tools, revenue managers can review useful insights such as ongoing forecasting and optimization, and free their time to manage higher-level tasks.

Going Paperless 

Customers today are looking for a seamless onboarding experience. These technologies can easily be adopted by car rental companies and help bring back abandoning customers that gave up the hustle of renting a vehicle. 

How does the local franchised or independent operator optimize his or her business to participate in the coming market? Is there an opportunity in smaller markets? Do they have any advantage over the big guys?

Some things may be more challenging for businesses with smaller fleets. For example, going on a car-sharing initiative might require a large fleet to begin operations with in order to be able to meet demand for the service, and justify it financially. 

But there are other areas that are not dependent on fleet size. First , utilization is a key KPI for both big operators and small ones, and being able to use new data driven technologies, predict demand, predict and plan maintenance and predict your customer behaviour leads to increase in fleet utilization. Based on Fleetonomy’s install base, we were able to show great improvements in fleet utilization for both large and small car rental operators.

Secondly, there are the opportunities coming in from new modes of mobility, and smaller operators have a lot to benefit from listing their vehicles on on-demand platforms.  

For instance, in 2018, Turo added independent car-rental companies to their platform, including small firms that often have special inventories. In Britain, for example, these boutique rental companies have vintage Rolls-Royce’s and custom Jaguars that people can now rent on-demand via Turo.  

What role will car rental have in the new discipline of Fleet Management as a Service? 

Mobility and delivery providers from the tech side are growing dramatically without owning a fleet of their own, and that creates a huge need for Fleet Management as a Service that can only be provided by a particularly experienced player like the auto rental industry due to the fact that they are the biggest fleet operators in the world. In 2017 Avis and Waymo began a partnership that is becoming a standard in one of the ways that Fleet Management as a Service might look like in the autonomous field. Avis is also helping Waymo before their cars even get on the road by providing license plates and registration, this is something a rental car company like Avis can do because of its close relationship with DMV’s in every state.

I believe that if played right, this can be only the beginning. What started in cleaning, oil changes, tire rotations, and general checking might later include maintenance for additional core technologies that are added to the fleet, such as sensors or battery charging and eventually could evolve into real-time remote operations which will be needed when vehicles become fully autonomous. 

What does the market look like in the medium term, say five to 10 years? 

I believe that the car rental industry is well positioned when it comes to being one of the big players in the mobility space, but I also think that it will take a few years for the transition to fully take place.

I think we will witness the rental industry’s evolution in the new market happen in stages: they will most likely transform from an asset provider to a service provider (for mobility operators) and eventually becoming full suite mobility operators themselves. It’s a game of owning the value chain and I believe that eventually the car rental companies will want to own it all. 

As asset providers, the focus will be on renting out vehicles while focusing on revenue management and digitizing the rental experience. As service providers the industry will most likely be focused on Fleet Management as a service for others, leveraging their deep understanding in maintaining fleets, until eventually, we will see car rental companies operating multimodal services. This will require a big shift in technology and operations but the reward will outweigh the risk in the long run. 

What partners are essential in the new mobility ecosystem? 

On the way to autonomous mobility it seems that the industry is sort of laying down the tracks while, at the same time, inventing the train itself and there’s a need for partnerships between a lot of different components involved in the space in order for things to succeed.

For example, we can look at the way that Uber and Lyft entered cities, before city authorities really understood what they were dealing with. As a result, traffic congestion increased  instead of going down, because there wasn’t a proper cooperation. We are experiencing a similar story when it comes to e-scooters that entered cities before thinking through what effect it would have on the citizens, sidewalks and more. Today these scooters are being left all over the place, often in a hazardous manner, but these problems can be solved with a bit of cooperation. 

Don’t get me wrong, I’m a huge fan of these services and I use them myself on a daily basis, but in order to fulfill their full potential – you need all of the players working together.

There’s a very interesting scooter pilot that the city of Portland published a few months ago in which they map the different KPI’s that the providers need to meet regarding the number of scooters allowed per area, proper positioning and more. They’ve tested the different providers accordingly and are now setting policies that operators need to follow if they want to operate in the city. This is exactly the kind of cooperation I’m talking about. 

I think that city infrastructure should become more supportive as well. When you look at car sharing for example – some cities only have station based operations while in others it’s a free floating model in which I can park the car wherever I wish as long as I follow the parking rules. Different cities decide how to handle their parking infrastructure and that affects the quality of service that we receive as end customers. 

When we talk about infrastructure we also mean charging grids. Electrification is trending, energy companies are entering the game as well and  collaboration with them is crucial. 

It’s generally more efficient to have a supplier ecosystem. Companies who want to move faster are partnering and enhancing each other’s businesses and making progress on the way to smarter mobility and evidently, the autonomous era. 

Where/how will car rental be a player in the era of autonomous vehicles? 

It seems that most of the market has acknowledged that they need to progress from just providing the vehicles to provide their experience in a Fleet Management as a Service model at the very least, just like we have seen in the Waymo-Avis partnership, and it’s interesting to see what their next step may be, and if they will choose to take a step forward and own the whole value chain. 

In my opinion, if the rental industry wants to be a leading player – they need to own the whole value chain and be the ones who will manage the entire interaction cycle with the end-users. 

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