The rental car industry is on the brink of a major transformation. With changing customer needs and government incentives encouraging businesses to pursue more sustainable solutions, electric vehicles are increasingly growing in demand. This blog provides an overview of the EV and rental car markets and explores the advantages and potential obstacles rental car companies may face when transitioning to electric vehicles.
The supercharged EV market
The electric vehicle market is buzzing and it’s not just everyday car buyers making the transition from standard gas-powered vehicles. Rental car giants are investing in EVs as they gain popularity in the market.
The EV market is steadily growing and is expected to reach $823.75 billion by 2030, according to Allied Market Research. With a push by the Biden administration to have 50% of all vehicle sales be electric by 2030, the demand for EVs is at an all-time high. Achieving this market share may seem steep for electric vehicle manufacturers as it currently stands at 14% of total new car sales.
EV buyer demographic
According to Kelley Blue Book, men are more likely to buy electric vehicles than women. In addition, younger Americans with college degrees and higher incomes, specifically those living in urban areas, are more likely to be attracted to the cost-saving benefits of electric cars.
As more makes and models enter the market, interest in EVs will take off to meet the demands of a much larger demographic. Below are the top-selling electric vehicles in the United States:
- Tesla Model Y
- Tesla Model 3
- Ford Mustang Mach-E
- Tesla Model S
- Chevrolet Bolt
Where is the rental car market now? Where is it going?
Car rental is a highly profitable industry with over two million vehicles in service. As it continues to recover from the pandemic, the global market is expected to be worth $144.21 billion by the year 2027. Now, electric vehicles are quickly becoming the preferred choice for rental car companies like Hertz.
What’s driving the shift to EV rentals?
Due to the increasing demand for electric vehicles, rental car companies are starting to provide consumers with EV options. Does it matter to renters whether they drive an EV or a gas-powered vehicle? For some, it might. Here’s why.
Saving on fuel costs
With unpredictable gas prices, interest in EV rentals is skyrocketing, even for drivers who have never operated an electric car. Consumers who rent through Hertz will receive a rental car at an 80% charge and be expected to return the vehicle with a 10% charge, which means no more filling the tank as required in internal combustion engine (ICE) vehicles.
Desire for a test drive
There’s no better way for consumers to know if an electric vehicle is right for them unless they take it for a spin. Electric rental cars are an opportunity for potential customers to understand how EVs operate and if they are the right fit for their lifestyle.
Reducing gas emissions
In addition to their savings on fuel, EV rentals have a positive impact on the environment. In fact, they reduce carbon emissions by approximately 66%, offering significant improvements in air quality within local areas.
Advantages of electric rental fleets
Electric vehicles can be expensive upfront, but the return is worthwhile. With lower maintenance and driving costs, they potentially save both rental car companies and drivers money over time.
Reduced fuel costs
Electric cars offer a great way to save money. EVs cost about $0.04 per mile to fuel compared to $0.14 per mile for an ICE vehicle. The U.S. Department of Energy offers a vehicle cost calculator to help understand the price of ownership for both EVs and gas-powered vehicles.
While the initial purchase of an EV can be more expensive, there are fewer maintenance costs associated with owning an electric rental fleet. EVs cost roughly $550 per year compared to their counterparts which cost $1,300 per year.
As mentioned earlier, the United States currently has a target to reach 50% EV sales by the year 2030. To make this transition appealing to businesses, local governments offer tax credits to purchasers of new and used electric and hybrid plug-in vehicles. The Inflation Reduction Act extends the EV tax credit until the year 2032. This incentive provides EV rental car companies with a $7,500 tax credit when they purchase an electric car.
Challenges of electric rental fleets
Whether it’s building an infrastructure to support EV rentals or uncertain depreciation, rental car companies may face challenges as they transition to electric cars.
Currently, there are roughly 160,000 EV chargers, but to meet consumer demand, this number will need to quadruple by 2025. Production help is available. ChargePoint gives businesses a 30% tax credit of up to $30,000 for installing their EV charging stations.
It’s no secret that vehicles lose their value over time, depreciating the most within the first year of ownership. EVs depreciate faster than their counterparts. For example, the Nissan LEAF loses 65.1% of its value within five years of purchase.
Lack of knowledge
Not only could staff be uneducated on the performance and operational differences, but many rental car customers may not have prior experience driving them. The industry will need to educate its staff and customers on how to operate EVs properly.
Are you prepared for EV fleet transportation?
With an increasing need for auto transport in the EV market, rental car companies may want to re-evaluate their current logistics partner. Due to the weight capacities and special handling requirements of EVs, it’s important to partner with an auto transporter with proven expertise.
The future ahead
As we look to the post-pandemic future, it’s clear that electric vehicles will continue to enter the rental car market. With motivators like the Clean Air Act and a desire to expand their customer base, we can expect to see more rental companies investing in EVs. However, the cost of charging infrastructure, vehicle depreciation and lack of EV knowledge are potential obstacles that need to be considered before making the switch.
Montway Auto Transport is one of the nation’s leading automotive logistics company, serving businesses in fleet management, rental car, sales, manufacturing and other industries. With a focus on innovation, technology and customer service, we set the standard in the industry. Montway is A+ accredited by the BBB and has a 4.7-star customer rating across all top review sites.