Many reasons for hike in rental car prices – but the worst may be yet to come

Published on 27 May, 2022

Overview

Put yourself in the shoes of a car rental executive. People are screaming for vehicles. You have a relatively small number to rent.

What are you going to do? Maximise your profits on limited supply, or do the ‘charitable’ thing and pitch your prices lower?

There’s only one answer. You can call it price gouging, doing good business, catching up on pandemic losses, but the end result is the same: higher prices.

It’s like trying to rent an apartment. If you don’t pay what they want, you don’t get it. One of the other few hundred people queuing behind you will.

The car rental companies would argue they have higher overheads, are paying top price for the cars and are partially recuperating horrendous losses incurred during the pandemic.

They are now, therefore, merely doing what businesses do – making as much as they can while the product is in demand.

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It is the culmination of the perfect storm that has been gathering on the horizon for some time. Back in 2020 when the pandemic restrictions hit hard and tourists were as scarce as hens’ teeth, companies sold stock to keep afloat. Hardly any cars were bought for the rental fleet.

Two years later, with few cars to rent, they are faced with massive increases in demand as pandemic restrictions are lifted. Stocks are now at 50pc of what they were before the pandemic. But demand is back to high levels.

According to data from the Society of the Irish Motor Industry (SIMI), the 1,941 new cars registered for the rental market so far this year are 17pc down on the corresponding period for last year, while they are 80pc below so far this month (they may increase in coming days).

Getting new cars to fill the void is difficult and will take time, not least because there is an acute shortage of ordinary new cars for private purchase too.

The core reasons for the price madness are:

- A severe shortage of semi-conductors. Cars can’t work without them. They need them for touchscreens, air conditioning, airbags, seatbelt tensioners and so on. There can be up to 3,000 of them in a car. But pandemic-related disruptions around the globe have slashed output. No conductors, no cars.

- The ongoing war in Ukraine has hit conductor production hard too. Russia and Ukraine are key suppliers of raw materials for making chips.

- And there is surging post-pandemic demand for non-motoring items that have chips in them.

Prices are also high in other markets, lest we only point the finger at Ireland. It’s just that we seem to be at the top of the league.

And you think it’s bad now? One source says things could get worse because there is no early end in sight for the conductor scarcity.

Car rentals in Dublin up to 50pc dearer than many other cities in Europe as supply issues hit hard

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