The world sometimes tries to simplify itself when the going gets tough. Reducing everything to the core activities and doing them well is often the way just to survive if prospering is too difficult. Although the US recession is supposed to be over, there's little sign of it in the economy. People are staying home and not spending. It's still thought prudent to pay down the debts. In such circumstances, one of the most obvious savings is to put off replacing the old with new. With a little patching and mending, we can all get by with what we have. As applied to the car rental companies, this means putting off renewing the fleet. It's cheaper to recruit a few extra maintenance staff to keep the existing vehicles running smoothly than to sell off each block of vehicles at fixed dates and replace with new. Indeed, most of the publicly quoted rental companies have been reporting increased profits as a result.
The problem now falls on to the manufacturers. For the last few decades, the US manufacturers have relied on the steady buying of standard models in volume. Although the prices charged were heavily discounted, this is money turned over quickly. If sales have to go through a dealer network and rely on credit from lenders less than excited by lending, sales are always going to be slow. The latest figures from the motor manufacturers show a 40% drop in sales to rental fleet customers.
GM's sales dropped by almost 20% and it's now losing market share to Ford, Chrysler, Toyota and Honda. That's the case even though Ford's sales have also fallen slightly. This leaves the labor market in the manufacturing industry in a worried state. If rental companies do not resume their volume buying soon, there will be lay-offs. Yet, with those rental companies maximizing their return on the capital they have invested in their stock of vehicles, profits are up and, if you are prepared to accept an older model, cheap car rental is within your grasp. Which is more important. Being seen in a brand new fleet car or paying a cheap car rental rate and driving a tidy older vehicle?