How telematics impact on the rent-a-car industry

Published by Jose Manuel Caramés Pons Smart Mobility

The rent-a-car industry is one of the most intensive in number of vehicles – only in US there are more than 2 million vehicles dedicated to rental.

The business model of rent-a-car companies is based on 3 main pillars:

  1. competitive acquisition of new cars based on high purchase volumes
  2. maximize the revenue of the rental for a period of 12 to 18 months
  3. sell the cars at the right moment considering brand, model, mileage and year, when the residual value can be maximized

The Industry is changing due to the implementation of telematics at the core of rent-a-car companies. The trend started a few years ago in the U.S. and is now expanding to Europe and Latin America where the big players are deploying, or at least analyzing telematics as a driving force to increase efficiency and productivity.

The benefits of telematics for the rent-a-car business can be split in to two main blocks

  • Benefits focused on efficiency
  • Benefits focused on revenue generation.

Types of Benefits Rent-a-car

Efficiency improvement

The key activities along the rental process are the customer pick-up process, customer drop-off process, maintenance services, repair processes (if needed) and “ready for service” for the next customer. Each activity can be optimized thanks to a telematics solution that enriches the information through APIs that tap into the corporate information backend of the rent-a-car company.

During the vehicle drop-off process, telematics enables rent-a-car companies to shift from a manual to an automated process in which customer contracts can be closed in real-time, as they are now able to collect odometer (mileage) and fuel level information remotely. It is now a choice for the companies to decide whether they want to charge or credit the fuel difference. From a ROI (return of investment) standpoint, this issue alone could finance the cost of implementing telematics.

Rent-a-car companies’ key success factor relies on achieving high occupancy rates that require a huge effort on managing vehicle stocks – this is knowing where each car is. Thanks to telematics we can provide real-time inventory of all the vehicle park, which reduces the downtime period, therefore maximizing revenues. Telematics can also easily measure the time spent in each phase of the operational model and look for efficiencies (on rental, car washing, maintenance or workshop) tracking the position in case of exception (theft and accident) to protect better the assets.

Revenue improvement

Telematics also impacts on customer satisfaction in case of breakdown, collecting engine failure codes, or accident data, through g-force sensors, automatically providing proactive road assistance and offering a replacement car.

As mentioned before, one of the pillars of the business model is to maximize the end value of vehicles and telematics helps minimize the deviation of mileage in cars of the same category alerting when a car is ‘ready’ to be sold.

The wealth of big data permits rent-a-car companies to know their customer better and adjust the commercial offering to them.

A common question from rent-a-car companies is how does telematics impact on customer privacy. Some smart telematics solutions solve this issue disabling GPS data collection while the vehicle is on rental, so no customer location data is collected during the rental.

In general, telematics opens a wide range of almost unlimited optimization opportunities, achieving a positive ROI (return on investment) from the first month of service. We foresee a relevant change in the rent-a-car industry in the next 5 years due to telematics, increasing competitiveness, especially between rent-a-car companies that have decided to embrace digitization through on-boarding telematics from those who do not take the step.

Jose Manuel Caramés Pons
Head of Global M2M Fleet Management at Telefónica