MEXICO CAR RENTAL MARKET ANALYSIS

Mexico Car Rental Market size was valued at US$ 1,108.1 Million in 2022, exhibiting a compound annual growth rate (CAGR) of 10.1% from 2023 to 2030. Car rental companies offer their service to people who do not want to own a car but need a temporary vehicle. The company also rents vans, trucks, motorcycles, and scooters to meet the needs of the self-moving industry. Alongside the essential rental help, vehicle rental offices likewise provide additional services such as Global Positioning Systems (GPS) route frameworks, insurance, cell phone services, entertainment systems and compact Wi-Fi. On November 23 2022, according to UNWTO (United Nations World Tourism Organization), between January and September, an estimated 700 million tourists traveled internationally, which is more than twice as many (+133%) as the number that was recorded for the same time period in 2021. In accordance with UNWTO scenarios, this represents 63% of 2019 levels and places the industry on track to reach 65% of its pre-pandemic levels this year.

Results were boosted areas, due to lifting of restrictions in various destinations after the pandemic.

During the pandemic, a lot of car rental companies started using Kiosks and Apps to make renting a car easier, which can save a lot of time. Car rental companies quickly switched to a contactless system because it makes customers feel safer and makes it easier for them to run their businesses in these tough times. In general, in order to attract and keep customers in a competitive market, car rental companies must remain attentive to customer preferences, provide a high level of service, and be flexible.

Mexico Car Rental Market- Segmentation

Figure 1. Mexico Car Rental Market Value (US$ Mn), By Car Type, 2022 & 2030

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Among car type, SUVs segment is expected to be the fastest growing segment over the forecast period. This segment was valued at US$ 657.66 Mn in 2022 and is expected to generate US$ 1,494.46 Mn by 2030. The segment is expected to exhibit a CAGR of 9.7% over the forecast period. The term "sports utility vehicle" refers to an SUV in the automotive industry. It is a kind of car with good ground clearance that is high off the ground and usually has four wheels.

The driving factor is that the customers who rent SUVs have more space for both people and cargo is the driving factor of this kind. Because a seven-seat SUV has ample space for a large group, its owners can transport groceries, luggage, and sporting and recreational equipment on road trips. Market players such as The Hertz Organization, Sixt SE, Avis Spending plan Gathering Inc., Alamo, provides SUV's vehicles on rent in Mexico.

The Mexico Car Rental Market is estimated to be valued at US$ 1,108.1 Million in 2022 and expected to reach US$ 2,388.8 Million by 2030, exhibiting a CAGR of 10.1% between 2023 and 2030.

Mexico Car Rental Market - Key Competitors

Key industry participants in the Mexico Car Rental Market include National Car Rental, EUROPCAR GROUP S.A, MEX Rent a Car, Budget Rent A Car System, Inc., Fox Rent A Car, Thrifty Car Rental, Inc., THE HERTZ CORPORATION, Sixt SE, Avis Budget Group Inc., and Alamo among others.

Mexico Car Rental Market - Recent Developments

1. On January 2021, Europcar Group S.A.- a provider of integrated mobility services has a strategic plan to replace its existing fillets with newer ones, and the company is also focusing on training and development programs in order to enhance the skills of their full-time and part-time employees. Europcar Group S.A offers an extensive variety of vehicle rental or renting administrations including, vehicle rentals on a transient premise, minimal expense rental administrations, vehicle sharing, and booking administrations through its armada of vehicles, vans, and trucks. During this process, the company has replaced a large number of vehicles model of 2020 with newer ones in 2021, and they have distributed them across various locations across Mexico. This move helped them to attract and retain distinguished customer and offer them a better customer experience. The overall quality of cars has also improved thereby showcasing a positive brand image and reputation of the company. The skill development programs shall also result in an overall better Service Quality Delivery.
2. On May 19, 2021, Mex Rent A car strengthened its partnership with TSD to grow corporate and affiliate business. Mex Rent a car is worked by Turismo Gargo SA de CV, a 100 percent Mexican Organization established in 1994. Mex Rent a Car provides its customers with a comprehensive location network, strategically situated in Mexico's major cities, airports, tourist destinations, and urban areas, among other nations. TSD designs and develops fleet mobility solutions for dealerships, auto manufacturers, public auto groups, and rental companies worldwide. Mex Rent A car was created in September 2013 by Turismo Gargo Group in Mexico, which has more than 25 years of experience in the car rental industry. Together both the companies can work collaboratively to offer the customers better mobility solutions focusing on enhancing the user experience and overall service levels.
3. On May 13, 2022 Fox Rent A Car announced that it had opened its first U.S. dual-branded location at Houston Hobby Airport in Texas. Fox Rent A Car, a member of the global mobility solutions provider Europcar Mobility Group, sets the standard for low-cost leisure car rentals in the United States and around the world. There are currently 21 Fox corporate locations in the United States, including Orlando, Las Vegas, Miami, and Los Angeles, which are the largest rental car markets in the world. Moreover, Fox Rent A Vehicle keeps an offshoot relationship with freely possessed areas in Canada, Mexico, Caribbean, South America, Focal America, Australia, Europe and the Center East. Fox is a well-positioned discount brand that caters to budget-conscious airport travelers. All of the brands in the Europcar Mobility Group are moving in the same direction and are prepared to face significant obstacles right away. The dual-branded location will be the first official Europcar corporate location in the U.S., and the twenty-second Europcar corporate location in the U.S. for Fox Rent A Car. The new dual-brand location joins an expanding Texas market that already includes San Antonio and Austin with a planned corporate fleet of several hundred cars. The expansion shall help the company cater to a larger audience and also cover a greater market share across the country.
4. On June 25, 2022 Hertz sponsors new Porsche racecar to compete in 2023 FIA World Endurance Championship. The Hertz, Dollar, and Thrifty car rental brands are operated by the Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., in North America, Europe, the Caribbean, Latin America, Africa, the Middle East, Asia, Australia, and New Zealand. The Hertz brand is well-known all over the world, and the Hertz Corporation is one of the biggest car rental companies in the world. Hertz announced it is sponsoring a new Porsche racecar to compete in the 2023 FIA World Endurance Championship (WEC), which includes the legendary 24 Hours of Le Mans race. Hertz will serve as title sponsor for a new Porsche 963 LMDh racecar from 2023 to 2025.

Mexico Car Rental Market – Drivers

Increased Standard of Living in Mexico     

A decade ago, Mexico’s economy was highly concentrated on a few industries such as oil & gas; however, the country has become a new manufacturing hub, which has improved its economy. Mexico has abundance of manufacturing units and is on track to becoming a major manufacturing hub and creating more employment, resulting in increased household disposable income. As a result, standard of living has increased significantly in the country and has in turn led to an increase in domestic tourism. According to the Federación Mexicana de la Industria Aeroespacial (FEMIA), an organization formed to boost Mexico's aerospace industry, the country's aerospace sector has grown from 100 manufacturing hubs in 2004 to 350 in 2019.

Increased Business Travels to Mexico

With the U.S. bordering it on the North and with Central and South America on the South, Mexico has several geographical advantages, due to which key car rental players are investing in Mexico for setting up their manufacturing units and expanding their businesses in the country. Mexico currently has more than 44 trade agreements and has received outstanding investment from OEMs in the last 10 years. It offers significant growth potential for industries such as automobile, aerospace, electronics, home appliances, steel and food. For instance, according to United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2020, Mexico ranked 14th in the world in terms of foreign direct investment inflows in 2019. This has led to an increase in demand for business transportation in Mexico, leading to long-term agreements between corporates and car rental companies.

Mexico Car Rental Market – Restraints

Highly Sensitive To Economic Downturn

A business is affected by a number of economic factors, including the level of economic activity in the markets in which the company operates. For a car rental agency, decline in economic activity typically results in decline both in business and leisure travel and accordingly a decline in the volume of car rental transactions. The key reason behind this is whenever implementing cost-cutting strategies in corporates, travel budget is the first thing considered. For instance, in 2019 Mexico’s economy was fall 8.2% from previous year this has affected trades including export manufacturing base and supply chain in Mexico. Car rental agencies may reduce rental rates to meet competitive pressures, which could adversely affect their financial condition and results of operations

Fluctuation in Fuel Cost

A car rental company can be negatively affected by limitations on fuel supplies, the imposition of mandatory allocations, rationing of fuel supplies or significant increase in fuel price. For instance, gasoline price in Mexico was ~0.4 US$/liter, which is increased to ~1.08 US$/liter due to increasing demand in Mexico. Moreover government taxes lifted the gasoline and diesel prices, this is affecting Mexico car rental market. Also, gasoline card earnings may be reduced if fuel costs fall, including relevant taxes, because fuel card fees are normally dependent on the total amount of transactions.

Mexico Car Rental Market– Opportunity

Introduction of New Business Models

A series of new business models has presented fresh opportunities of growth to the car rental services industry. For example, the aggregator model enables rental companies to connect with actual car owner; this simplifies the renting procedure, along with significant benefits of cost and risk reduction.  For instance Hertz, a car rental company is focusing more on hotel/travel, self-drive and corporate lease (long-term) rentals. This enables ease of availability to customers from multiple locations. The aggregator model reduce capital investment and risk factors, compared to traditional business models followed by most car rental companies.

Electric and Hybrid Vehicles

Increasing stringent emission regulations to reduce pollution is prompting transport companies to include electric and hybrid vehicles in their fleets. Although demand for these vehicles is currently low, it is expected to increase significantly in the near future. For instance, in February 2022, Grupo Guepardo, a car renting company in Mexico, signed alliance with JAC, a China-based carmaker. Grupo Guepardo will deliver a fleet of City Cars for Budget, full-electric versions of its JAC E10X, as part of the agreement.

Mexico Car Rental Market- Impact of Coronavirus (Covid-19) Pandemic

A drop in Mexico air traffic has led to a decrease in demand for airport automobile rentals. Manufacturers operating in the car rental market are recovering from the losses caused due to disturbed services due to halt on transportation activities and travel restrictions. Major market competitors, such as MEX Rent a Car, Alamo, and others, have disposed of their older cars at a higher volume than typical during the epidemic in order to generate revenue from these transactions. Revenue generation through capital sales, indicates a downturn in revenue from operating activities thereby placing the company in a vulnerable position from not only a financial perspective but also a brand perspective.

*Definition: A car rental, hire car or car hire agency is a company that rents automobiles for short periods of time to the public, generally ranging from a few hours to a few weeks. It is often organized with numerous local branches (which allow a user to return a vehicle to a different location), and primarily located near airports or busy city areas and often complemented by a website allowing online reservations.