Why there is shortage of Rental Cars Globally?



Rental Prices are sky-rocketing, customers are unable to get their desired rental vehicle at a reasonable price and supply is a constraint. Read below as we look in-depth at what is causing the panic in the car rental industry worldwide. Why rental cars are more expensive and harder to find out nowadays, it’s a common question for everyone and the main reason is that car manufacturers are suffering from tough times due to the shortage of microchips globally, which, in turn, has become a challenge for car rental companies and customers eventually. Last year, the companies were able to dispose of a big chunk of their fleets when travel decreased due to the worldwide pandemic without placing orders for new inventory, which used to be a normal practice before the pandemic. However, as the restrictions eased and traveling increased globally, the rental companies faced an unprecedented surge in demand. It’s fair to say that due to the pandemic and uncertainty caused due to it, no one could have predicted exactly how the situation regarding demand and supply would evolve. Now, the sudden surge in demand, whereas, companies left with limited inventories, have made it very hard for the customers to get the vehicles at the prices they are used to getting normally. In addition to this, car rental companies are unable to buy new cars, owing to a global computer chip shortage, which is why the prices are soaring, supply is depleting and customers are left with little to no choice. As per the current situation, the businesses in this domain are suddenly pulled out from survival mode to cooping with heavy demand with limited or no supply. A lot of the companies did place the order for more vehicles in bulk, but they hit the roadblock when it was discovered that the computer chip shortage has troubled the entire auto industry, as well as many automakers globally, have halted their production for weeks to control the spread of the virus. To sum it up, the year 2020 has been a series of unprecedented events for everyone, especially businesses in the Auto industry as first the demand dropped to absolute zero, which was followed by desperate measures to ensure their survival and eventually demand returning and shortage of supply in the industry due to various factors.

 Why has demand for rental cars increased this year?

There are multiple factors resulting in the sudden return of demand for car rentals. The most prominent one being the successful vaccination drive globally which resulted in the return of global tourism. In addition to this, it has been observed that a good chunk of public commuters has started pooling their resources to rent a car instead of using public transport, especially in GCC countries. These factors, combined with people drifting away from owning cars and preferring rental cars, have caused an unforeseen surge in demand. Since the demand has surpassed supply for the vehicles at a massive scale, companies have increased prices to coop up with the demand as supply chain issues are preventing them from increasing their fleet size.

Why rental car rates are higher in 2021?

Rental car prices have been increased all over the world due to higher demand and low supply of vehicles due to halt in supply chain owing to shortage of essential spare parts and computer chips. This was followed by various logistical challenges, which further worsened the demand and supply equilibrium, and eventually, a hike in the prices was deemed as the only reasonable solution to match the soaring demand. According to the analysts, it is expected that the shortage and high prices will extend into next year and might not be resolved until 2023.

 How can customers get a rental car on time?

In order for customers to ensure they get their rental car on time, it is advised to book the car as earlier as they can once their plans are finalized. eZhire, being an on-demand car rental app, has a pivotal role to play here. eZhire provides a seamless and the most convenient way to book a car with a tap on their phones.

When the shortage issue will be resolved?

According to Siew Hai Wong, president of the Malaysia Semiconductor Industry Association, chip production will start returning to normal as soon as more workers will get vaccinated. Automakers are considering shifting to an order-based distribution system rather than keeping huge supplies on dealer lots. However, it is not sure that such a system will be more efficient.
To sum it up, it is expected as per market research and analysis, that the effects of this demand and supply gap might last a couple of more years and might not even be resolved until 2023.


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