Uber & Lyft vs. Traditional Rental Cars

With all the recent talk of Uber, its expansion, and of self-driving cars (Davies, 2016), many may not have noticed that conventional rental car companies’ profits are waning in the wake of the successes of Uber, Lyft, and other new transportation companies. In November, it was reported that “Hertz shares fell 23 percent, wiping out $739 million in equity value” (Welch, 2016), and analysts are predicting new mounting challenges for traditional rental car companies who do not make the experience better for consumers (Lieber, 2016). In light of the fact that may airports have now lifted bans on Uber and Lyft, and that many business travelers are opting for an easier and more convenient mobile-based experience at the airport (Lieber, 2016), the environment is even more ominous. Though, unlike Hertz, competitor Avis did beat sales and profit estimates (Welch, 2016), the signs or trouble are there (e.g., decline in rental rates and volume) for the traditional rental car industry, and losses may not be avoidable by simply controlling costs.

Not all is perfect, however, with ride sharing services and new transportation companies. There are issues that may not come up with Hertz or Avis, such as having to publish official Community Guidelines (Brown, 2016) to prevent undesirable behavior that would not matter to rental car companies. For example, talking with your driver while holding an open container of alcohol or choosing not to use your seatbelt could get you banned from Uber for three lifetimes (Brown, 2016). Until traditional retail car companies drastically shift business or product strategy, these types of issues, which take resources to manage, will not be need to be addressed.

Brown, B. (2016, December 10). If the ‘Uber back seat club’ is on your bucket list, you may get banned for life. Digital Trends. Retrieved from: http://www.digitaltrends.com/cars/uber-behavior-rules/

Davies, A. (2016, September 16). Here’s what it’s like to ride In Uber’s self-driving car. Wired. Retrieved from: https://www.wired.com/2016/09/heres-like-ride-ubers-self-driving-car/

Lieber, R. (2016, December 9). With Uber and Lyft nearby rental cars may be ripe for a comeuppance. New York Times. Retrieved from: http://www.nytimes.com/2016/12/09/your-money/with-uber-and-lyft-nearby-rental-cars-may-be-ripe-for-a-comeuppance.html

Welch, D. (2016, November 7). Hertz’s shares tumble 23% after profit misses estimates. Bloomberg. Retrieved from: http://www.bloomberg.com/news/articles/2016-11-07/hertz-falls-as-quarterly-profit-trails-estimates-outlook-is-cut