Peter's Post: How self-driving cars could transform the rental market

Monday, November 4, 2013

How self-driving cars could transform the rental market

Experts: Driverless vehicles may open doors to new business

Vince Bond Jr.
Automotive News | November 4, 2013 - 12:01 am EST

Self-driving vehicle technology could one day give new meaning to Enterprise Rent-A-Car's "We'll Pick You Up" tag line.

Rental-car companies could send driverless vehicles to consumers who no longer would need to stop by a rental office, an industry consultant says.

It could be as simple as someone picking up a smartphone and choosing a vehicle to pick him or her up, whether it's from Enterprise, Hertz, Avis or another agency.

Enterprise officials think the company, which has more than 5,500 offices within 15 miles of 90 percent of the U.S. population, is set up well for a future with autonomous vehicles.

Enterprise, founded in 1957, has long embraced an urban strategy.

There was a time when rental cars were available only at airports, but Enterprise helped redefine the rental market by offering local rentals, says Lee Broughton, head of sustainability at Enterprise Holdings, the parent of Enterprise Rent-A-Car.

Now autonomous cars present possibilities that could again redefine the industry.

"It takes away any obstacles that are there where you require at least one human being to make the time to pick a customer up," Broughton says.

Rental-car companies generated revenue of nearly $24 billion in the United States in 2012, according to Auto Rental News. Enterprise says about half of that revenue came from airport business and half from neighborhood locations, with Enterprise controlling 75 percent of the neighborhood market.

Trickle down

The concept of autonomous vehicles picking people up is more than two decades away from reality, estimates Neil Abrams, president of car rental consulting firm Abrams Consulting Group.

Abrams says new vehicle technologies tend to trickle down to rental fleets -- pointing to GPS and Sirius XM Radio as recent examples. A similar situation could play out with self-driving vehicles, he says. Rental companies will take a wait-and-see approach with the technology as it is introduced.

Abrams says rental-car companies -- especially the big three of Enterprise Holdings, Hertz Global Holdings and Avis Budget Group that control 95 percent of the domestic industry -- won't be on the front end of the self-driving revolution.

Potential liability issues stemming from autonomous vehicles also will have to be considered, he says.

"If self-driving vehicles are introduced into rental fleets, will this change the risk element of the business?" Abrams asks.

New possibilities

Autonomous vehicles could aid rental-car companies by making them more accessible, while breaking ground for new partnerships.

Enterprise's Broughton says he foresees a scenario in which instead of shopping at a grocery store, consumers could order products online and have autonomous Enterprise vehicles deliver the goods.

Jerome Schmitt, UX architect for Enterprise Holdings, says an autonomous vehicle also poses opportunities for people with disabilities.

"If we can physically send a car to pick them up, we can get them from Point A to Point B," says Schmitt, who focuses on user experience. "We can't really help that person right now without somebody driving that car for them."

Car sharing

The car-sharing model for companies such as Zipcar and City CarShare could change significantly by allowing them to serve several people at once with one vehicle or pick customers up on demand.

Car-sharing companies enable consumers to rent vehicles by the hour. The vehicles are typically housed in garages or parked in public and private lots around cities.

Rick Hutchinson, CEO of City CarShare, says most of his customers walk, ride bikes or take public transit to pods -- the designated locations where the vehicles are stationed and returned after use.

City CarShare has more than 220 locations mostly in Oakland, San Francisco and Berkeley, Calif., with nearly 80 percent of its more than 15,000 members living within a quarter-mile of a pod.

By adding a fully autonomous vehicle to the equation, Hutchinson says, consumers could summon a vehicle with their smartphones.

"The ultimate way of sharing is to have vehicles that are on demand. Because the idea at least is they could move along with one person or act as virtual buses and things like that," Hutchinson says. "It's huge. I don't think it's 30 or 40 years, I think we'll see it much sooner."