Posted on 12/26/2021 1:21:49 PM PST by blam
Supply chain issues aren’t just showing up for consumer staples, they’re also starting to rear their head in rental cars.
There has been a shortage in the rental car industry since earlier this year and while travelers are “encountering higher rates and few choices,” according to a new Wall Street Journal article, companies like Hertz are “struggling” to re-stock fleets after downsizing due to Covid.
For customers lucky enough to even find a car, many are being forced to downsize or book vehicles they didn’t originally intend.
At the same time, rental rates are skyrocketing. The daily rate is now $81, which is up 31% from a year prior, WSJ reported. Hasn’t someone told Hertz the “official” CPI number is just 6.7%?
This figure is up from about $46 per day, prior to the pandemic.
In winter destinations like Maui, Salt Lake City and Bozeman, Mont., rates are over $100 per day, WSJ reported.
The omicron variant has also caused some travelers to switch from flying to driving, further depleting supply of rental cars. One traveler who chose to drive to North Carolina from Chicago told the Journal: “It was overall a high-stress situation.”
The same traveler was limited to just two car choices, a Dodge muscle car and a Chevy Spark subcompact, and paid $725 for a 9 day trip.
“I couldn’t think too much about budget or anything like that because if we didn’t get it all figured out in a matter of hours, we were going to be out of luck,” she said.
Another potential traveler, 24 year old Cassie Clark from New York City, told the WSJ: “I’m not going to see my family for Christmas at all, all because of the rental car situation.”
Meanwhile, rental car companies, like everyone else, are citing the semiconductor shortage as a reason for lack of supply.
Avis Chief Executive Joseph Ferraro recently said that a large part of the company’s great prior quarter was due to higher prices. “The Americas booking patterns for the fourth quarter and holiday seasons appear robust and are currently outpacing 2019 levels,” he said on an earnings call.
The supply crunch partially comes as a result of names like Hertz downsizing their fleets after Covid. But rental-fleet utilization rates have risen recently. Avis’ fleet utilization was up to 71% from 50% in the first nine months of the year.
Henry Harteveldt, a travel industry analyst, concluded: “The car-rental situation will only get better if the car-manufacturing landscape improves. Until then, it’s going to be one of the bleakest times to be renting a car.”
So they sold cars to take advantage of high resell values now claim it is high demand.
Someone in the Hertz executive suite made a brilliant decision ,at the beginning of the lockdown ,to sell half their fleet. Now they can’t replace the cars because of the chip shortage.
They’ve become the United Airlines of the rental car industry.
Yep, that happened to us. My hubs car needed some parts that were on back order, and he wanted to drive to a town about 4 hours away - but I didn’t want him to take MY car (LOL), so he had to rent one for that trip.
Three months later, and the parts just came in. For a Honda. Exhaust. Those are usually a two day wait, or a week if you want OEM. We couldn’t even get OEM, because no one knows how long those are on back order, but probably longer than after-market. This has been such a pain.
My mechanic said he’s even having trouble getting tires.
The sell down of the Hertz fleet was beyond their control. They had financed a large part of the fleet with securities - one term of the securities said that any bankruptcy filing accelerated repayment - that led the trustee of the securities to seize and liquidate the cars.
Exactly. They had to sell 182,500 vehicles by the end of December 2020.
https://www.thedrive.com/news/35109/hertz-must-sell-nearly-200000-cars-by-december-to-pay-back-creditors
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