A Silver Lining in the Car Rental Industry

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Before COVID-19, the car rental industry was struggling as more people went for ride-sharing services over car rentals mainly because the convenience of getting a ride when you want wherever you are was cheaper than renting a car. With COVID-19, with economic activity plunging and very little traveling due to the pandemic, many businesses are left to deal with $0 in revenue for months. 

Photo by Vasudev Pendyala on Unsplash

One victim of the economic crisis caused by the nationwide quarantine is Hertz, a car rental company. Recently, Hertz filed for bankruptcy as they couldn't pay their interest payments on their debts. While it's reasonable to believe that the car rental industry would be struggling alongside the airline and cruise ship industry, I believe this pandemic could be the catalyst that can help the car rental industry recover. 

Because of COVID-19, people will not want to travel with groups of strangers. This includes avoiding ride-sharing services. In a recent article by Reuters, journalist Sanjana Shivdas describes that interest in car rentals is rising. The main reason for the increase in demand can be found in this quote:

"Kayak is seeing more demand for car rentals than air travel from customers looking to avoid crowds and stay closer to home..."

Many that travel far usually go by plane. Since people are scared of flying on planes, people are going to travel in cars. Cars not only give you that convenience where it can help you go anywhere you want whenever you want but at least you won't have to be with strangers in it. 

If this momentum continues, then companies like Hertz would've wished that they strengthened their balance sheets during the good times. Meanwhile, other car rental players like Avis Budget Group (NASDAQ: CAR) will be able to capitalize on the growing demand for car rentals. For ride-sharing services like Uber and Lyft, I find that they'll have a slower recovery as people will still be cautious about using ride-sharing services to travel to places. At the same time, since many people do rely on ride-sharing services to go to places for various reasons, the recovery time for those companies will be shorter.