The car-rental market in the Southern African region is set for growth of up to 10% in the coming year as long as a predicted improvement in airline capacity comes to fruition. This is anticipated to bring a fall in rates in the short term.
Sandile Ntseoane, GM of the Southern African Vehicle Rental and Leasing Association (SAVRALA), recently gave Travel News an update on the state of the industry.
One of the reasons for this predicted good growth is that the industry is continuing to recover to its pre-pandemic levels, says Ntseoane.
“The reality is that the market is still not at pre-Covid levels, as it relates to the recovery of flights, transactions, passengers and fleet.”
In 2023, rental days were at 90,63% of the levels seen in 2019, according to SAVRALA data.
Compared with pre-pandemic levels, the whole industry, looking at 2023 results, has experienced shrinkage in rental days. Corporate is down by 1,2%, local leisure by 15,6% and inbound leisure by a whopping 28,9%.
“We are a long-haul destination and the car-rental market is very dependent on the recovery of the number of international airline carriers flying here. Additionally, the shortage of domestic seats is deterring local tourist growth,” he says.
Ntseoane explains that growth in the car-rental sector will come with the stabilisation of the region’s political environment, bringing relief to corporate car-rental numbers while leisure rentals should improve with the reduction in air ticket prices and inflation.
Within the industry, an increase in fleet capacity and hikes in inflation-related rates by a maximum of 5% will see the car-rental market’s revenue grow by about 10% in the next year, says Ntseoane.
“With regard to fleet sizes, I expect fleets to grow by small numbers. Most companies were over-fleeted due to a poor used-car market. If volumes grow by 5% and we claw back the current 4,2% decrease in fleet utilisation, fleet growth will be around 1%.”
Alternatively, car-rental companies may take another approach to profit from the used-car market by running lower fleet utilisation and focusing more on increasing used-car fleet sales 12 to 18 months down the line.
Either way, Ntseoane says expensive rates as a result of supply constraints will subside in the next year or two and most gains to the industry rates will be inflationary, as vehicle inflation is almost double that of the Consumer Price Index.
Other challenges faced by the market include the high number of accidents and theft, the cost of repairs with increasingly new technology, high interest rates, and price wars as new entrants arrive in the market.