Car rental consolidation in Europe upcoming?

When stepping off the plane at a US airport, one seemingly has an abundance of choice when renting a car for the onward journey. All the familiar and well-known names in the rental business are present, including Enterprise, National, Alamo, Hertz, Dollar, Thrifty, Avis, Budget and, for European travelers, Sixt, who is currently pushing hard into the US market. However, most people do not necessarily know that

a) Enterprise owns National and Alamo,

b) Hertz owns Dollar and Thrifty,

c) Avis owns Budget and

d) that Enterprise, Hertz and Avis through their subsidiaries collectively have a market share well north of 90% of the overall US car rental market, thus effectively being an oligopoly.

At a European airport the same names will be available, with the notable addition of Europcar, the European leader. However, the market concentration is much less pronounced in Europe than in the US. According to Europcar’s listing document for its June 2015 IPO at Euronext Paris, the consolidated market share of the top 5 European players (Avis, Enterprise, Europcar, Hertz and Sixt) is approximately 65% in Europcar’s corporate countries (France, Germany, the UK, Italy, Spain, Portugal and Belgium), including the rest of Europe should not fundamentally change the picture. Market concentration in Europe is accordingly far below the American situation. Why is there such a difference between Europe and the US? The car rental market across Europe is still basically made up of national markets, all reflecting the cultural differences between consumers in various countries. As a consequence, in most markets there are significant independent players, with very limited, if any, presence internationally. Examples include Rent-a-Car, ADA and UCAR in France, Maggiore (acquired by Avis Budget early 2015) in Italy, RecordGo and Goldcar in Spain, to mention a few prominent examples. The fact that the big countries, measured in market size, have reasonably big independent players obviously decreases overall concentration.

Where does this leave us? Consolidation is most likely coming, whether it will be to the same level as in the US remains to be seen. Some of the benefits and drivers of a potential consolidation has been discussed by Chris Brown at Auto Rental News in a recent blog. European competition authorities tend to be somewhat stricter than their American counterparts, so it is doubtful whether three players will be allowed to control 90%+ of the overall market. Thus, what is possibly most realistic is either a scenario where a couple of the pan-European players join forces some way or the other, reducing the number of European players to 3 or 4, which would leave the current market concentration intact, or 1 transaction among the big 5 coupled with a roll-up of the small and mid-size players, leading to a somewhat more concentrated market, e.g. the top 4 controlling somewhere in the 75-80% of the market.

Whatever the scenario that will come to fruition, these are exciting times in the European car rental industry and one should except some eventful years going forward. This creates interesting opportunities not only for the aforementioned European players, but also for the national/ regional players

How the dices will potentially drop is anyone’s guess at this stage but I am to look at possible constellations and outcomes in future posts.

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