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  • (dramatic music)

  • - [Narrator] Americans are traveling again

  • but if your summer travel plans involve a rental car,

  • be prepared for long lines and sticker shock.

  • - I think it's all over the country.

  • There isn't one area where you can find a cheap rental car.

  • - Using a car right now is expensive,

  • whether you're buying it or renting it.

  • - [Narrator] According to the travel website Kayak,

  • rental car prices in the first two weeks of June

  • are up 89% for the July 4th weekend,

  • compared with the same dates in 2019

  • and as much as 300% in some places.

  • But even if you decide to pony up the additional cash

  • for a vehicle,

  • many reservations are simply not being honored

  • by rental agencies

  • and travelers have reported showing up at rental counters,

  • only to be turned away

  • because there aren't enough cars on the lot.

  • So why have rental cars become so expensive?

  • And how long can we expect these high prices to last?

  • - It's a pretty classic supply and demand issue.

  • There are not a lot of rental cars to go around

  • because these companies downsized their fleets

  • when nobody was using them.

  • At the beginning of the pandemic,

  • travel of any kind really collapsed,

  • but particularly air travel,

  • which the rental car companies rely on very heavily.

  • And so there was this situation

  • where they had to react very quickly

  • to a very rapid drop in demand.

  • - [Narrator] For months, the pandemic transformed airports

  • into ghost towns, which in turn wiped out

  • about 2/3 of the rental car business.

  • - What happens is all of the rental car companies

  • react quickly, sell off their cars

  • before they lose too much value.

  • Downsize their fleets, cut costs, downsize their staff.

  • I mean, find every way to pinch pennies

  • and stay alive really.

  • It was a make-or-break moment for these companies.

  • - [Narrator] To survive, many rental car agencies

  • sold off large parts of their fleet.

  • - It was a great time to sell cars too

  • because new car production still hasn't normalized.

  • So they sold a lot of cars

  • to build cash flow

  • but then they also sold cars

  • in order to right size to demand.

  • And so you had a double whammy

  • in terms of supply getting cut.

  • And then you also had Hertz go bankrupt.

  • (pensive music)

  • - [Narrator] In May of 2020,

  • Hertz filed for bankruptcy

  • but Mazari sees a silver lining in the disruption.

  • - COVID was a blessing in disguise for this industry

  • because it created pricing discipline

  • and supply discipline.

  • These companies basically had to cut their fleet size down

  • by 35%, so this was a dysfunctional oligopoly.

  • Supply was never tight.

  • - [Narrator] This summer, consumer demand has returned

  • and now a new problem has arisen.

  • There's an extreme shortage of new cars.

  • - When demand came back,

  • it did not trickle back.

  • It came back almost overnight

  • and you have these companies

  • that have right sized themselves

  • to a market that basically wasn't using them before.

  • And they just weren't prepared.

  • - We're also hearing is that these companies

  • are so desperate to get fleet

  • that they're buying cars in the used car market,

  • which is in the auction market.

  • So don't be surprised if you get into some rental car

  • that has a lot more miles on it.

  • - [Narrator] Exacerbating the car shortage issue

  • is another shortage: semiconductors.

  • Automakers have said the production

  • of new vehicles has been slowed because of chip shortages.

  • - New car production with a chip shortage

  • isn't gonna normalize until Q4.

  • So for these companies, it's gonna be very tough

  • to add fleet back this year.

  • And so this year, pricing's gonna remain very high.

  • - [Narrator] In separate statements

  • to The Wall Street Journal,

  • both Hertz and Enterprise acknowledged

  • that customers might have a tougher time securing a rental

  • because of the spike in demand.

  • Enterprise wrote,

  • "While still below pre-pandemic fleet levels,

  • our fleet is not down significantly.

  • A key challenge right now

  • is the global chip shortage,

  • impacting new car availability."

  • Hertz wrote, "The microchip shortage

  • is also affecting the car rental industry

  • but Hertz is working closely

  • with our automotive partners

  • to add new vehicles to our fleet

  • as quickly as possible while also moving vehicles

  • to the areas with highest demand."

  • (dramatic music)

  • If you have to rent a car this summer,

  • Mazari recommends booking early and booking backwards.

  • Typically, travelers book flights or hotels first

  • but that strategy won't work this year.

  • - You essentially, you just have to book in advance

  • and kind of pay up for it

  • and be prepared for that, if you're lucky enough to get one.

  • (dramatic music)

(dramatic music)

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B1 US WSJ rental shortage fleet narrator hertz

What’s Behind the Rental Car Shortage? | WSJ

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    moge0072008 posted on 2021/07/29
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