Car Rental Market to Be Worth More Than $122.0 Billion by 2024

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Car Rental Market to Be Worth More Than $122.0 Billion by 2024

February 13
12:56 2020
Car Rental Market to Be Worth More Than $122.0 Billion by 2024
Prospering Travel and Tourism Sector Driving Car Rental Market

The growth in the travel and tourism sector, need for a convenient commuting option, and increasing concern for the environment are driving the popularity of car rental services. In 2018, the worldwide car rental market valued $78.7 billion, from where it is predicted to advance at a CAGR of 7.9% during 2019–2024 (forecast period), to reach $122.6 billion in 2022. Car rental refers to the hiring of cars for a longer period, compared to everyday commute, for which users are charged on the basis of the distance traveled and journey time.

When segmented on the basis of vehicle type, luxury, executive, and economy are the various categories. Among these, the economy category led the car rental market in 2018, in terms of value, as owing to their higher fuel economy and lesser carbon emissions, they are preferred by service providers. During the forecast period, the luxury category is projected to experience the fastest growth, due to the increasing disposable income, which would allow users to pay the higher price charged for mobility services via these cars.

Based on purpose, the car rental market is bifurcated into business and personal, of which personal purpose was the larger bifurcation during the historical period (2014–2018). This is credited to the prosperity of the travel and tourism sector, owing to an increasing number of people going on leisure trips. To avoid the hassle of driving their own car, travelers are preferring renting one. Additionally, such services let people travel as per their own convenience and at their preferred speed.

The growing travel and tourism sector is also one of the key factors driving the growth of the market. The World Travel and Tourism Council said that the tourism industry grew by 3.9% between 2017 and 2018, which was higher than the growth rate of the worldwide gross domestic product (GDP), to which it contributed $8.8 trillion. With the expansion in this sector, driven by the rise in the disposable income of people, the demand for car rental services is also increasing.

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Another important growth driver for the car rental market is the fact that such services offer convenience of traveling. To own a car, one has to pay the heavy purchase cost and spend on insurance, fuel, parking (at certain places), and regular servicing. Car rental allows people to enjoy all the benefits of a personal vehicle without actually owning one, with the charges only levied on the basis of the journey time and distance. Further, rented cars are available almost throughout the day, round the year, thereby making anyplace, anytime travel possible.

With the increasing need to curb the carbon emission from vehicles, the adoption of electric cars is becoming the car rental market trend. For example, Sixt SE has introduced several electric cars, such as BMW i8, Tesla Model X, BMW i3, and Tesla Model S, in its fleet, in certain European and U.S. locations. Similarly, Mahindra and Mahindra and Zoomcar India Pvt Ltd. began a partnership in 2018 for deploying electric cars, for renting purposes in India.

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During the forecast period, the market would grow the fastest in Asia-Pacific (APAC), owing to the increasing number of short leisure trips being taken. Due to rapid industrialization and urbanization, the disposable income is rising in the region, which is driving the travel and tourism sector. While Japan, Indonesia, and Vietnam are among the most visited APAC countries, China and India are among the largest regional spenders on tourism.

Therefore, with an increase in tourism activities, the popularity of car renting would continue to rise.

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