Page 7 - Fortune-November 01, 2018

McKinsey & Co., thinks business travelers
will be the first to clamor for self-driving
rental cars, which will enable them to work
instead of drive and still get to their destina-
tion. “The value of freed-up time is simply
more relevant for them,” says Kaas. Such
FIVE REASONS YOUR RENTAL-CAR travelers account for 40% of Avis Budget’s
customers: If they want robo-rentals, Avis
COMPANY WILL LOOK will need to deliver.
VERY DIFFERENT IN FIVE YEARS
N young man, who lives in Chicago,
Ride-sharing and self-driving cars have forced the industry OT LONG AGO Larry De Shon’s son
called him with some news: The
to reinvent itself. Here’s how the big players are adapting.
was selling his car because he
didn’t need one. The news “broke
1. are trying to get in 1% of revenues in the my heart, because it was his graduation gift,”
CONNECTED CARS at the ground level “mobility” sector, but
with the AV-makers. the industry leaders De Shon recalls. “I ask, ‘How can you sell your
The rental-car com- Key partnerships: all dabble in the field. car?’ The kid answers, ‘I can take a Zipcar, I
panies are gradu- Avis and Waymo; This is helping them can take an Uber.’” The upside: The kid also
ally connecting their Hertz and Aptiv; En- prepare for a future
millions of vehicles terprise and Voyage. with more counter- rented cars from Avis four times in the ensu-
to the Internet. The free locations for ing months, for longer weekend trips.
aim: to cut mainte- 3. their rental fleets. All signs indicate that car-ownership rates
nance costs, make FLEET Key brands: Zipcar
sure cars spend MANAGEMENT (Avis), EnterpriseCar will continue to drop as younger generations
more time on the Share, and Hertz opt out. As De Shon’s story suggests, that’s a
road, and generate Rental rates have 24/7. potential opportunity for rental-car compa-
new sources of rev- stalled, so Avis nies. The trend may well create a much bigger
enue from selling ads and others want to 5.
and services. Avis diversify their rev- RESALE RETAIL customer base. But the rise of Lyft, Uber,
Budget has com- enue sources. With and the robo-taxi crowd creates much more
mitted to getting all sprawling networks Rental-car compa- competition.
600,000 of its cars of garages and exper- nies resell their cars
connected by 2020. tise in maintaining, after a few years, and Avis’s Lyft partnership, announced in Au-
fixing, and cleaning the biggest drag on gust, is the latest example of how Avis hopes to
2. cars, these compa- industry profits has use technology to hedge multiple bets. Under
AUTONOMOUS nies see opportunity been a weak second- the agreement, the Avis brand will provide
VEHICLES in selling fleet man- hand auto market. To
agement services better control the thousands of cars to Lyft’s Express Drive pro-
Autonomous vehi- to other companies, timing and location gram, which mobilizes prospective drivers who
cles (AVs) are coming, including AV-makers. of those resales, don’t own cars. The deal gives Avis an in with
and analysts expect the Big Three are
them to be especially 4. building their own a future big user of AVs, and more experience
attractive to the CAR SHARING physical used-car working with the ride-sharing business model.
lucrative business- sales lots. Avis now It also helps it get more revenue-generating
traveler market. The Car sharing ac- has seven stores and days out of its regular fleet cars.
rental companies counts for less than plans to add more.
Avis’s core business, meanwhile, is far from
extinct. Its typical rental today is a four-day
contract involving some 450 miles. A family of
four landing in Salt Lake City en route to visit
hotly contested field: Hertz and Enterprise the national parks in Utah is not about to use
also have strong fleet-management business- Uber or Lyft. Hertz CEO Kathryn Marinello
es.) For Avis, deals like its Waymo partnership estimates there is only currently a 10% over-
offer the chance to earn extra revenue without lap between the traditional rental-car market
the heavy fixed cost that comes from owning and the mostly urban short-haul market
those cars. Waymo and other tech companies, where the ride-sharing services dominate.
in turn, avoid the expense of managing main- Still, the change that has swept through that
tenance. As De Shon puts it, “Why go out and 10% in recent years has shown Avis Budget
develop something that’s already built?” that it can’t afford to sit still. The tech partner-
Getting a foot in the door with the AV- ships, says Orduña, the innovation officer, are
makers also sets the stage for Avis to some- finally beginning to change “the perception
day radically overhaul its own fleet. Hans- of us as a dinosaur sitting there, waiting for a
Werner Kaas, senior partner at consultancy comet to hit.”

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