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The rental car industry in danger

The rental-car industry has been severely affected by the general ban on travel to stem the spread of Covid-19. Avis, Hertz Global Holdings Inc. and Enterprise Holdings Inc. have asked the Treasury Department to include the industry in federal plans to rescue U.S. travel companies. The French state has intervened as guarantor of a line of loans worth 225 million euros requested by the car rental company Europcar to maintain the continuity of its business.

- Pascal Serres

It is a relatively concentrated market dominated by 3 companies and 9 brands in the USA (Enterprise, National, Alamo, Hertz, Thrifty, Dollar, Firefly, Avis, Budget) representing 94% of the market. In Europe the same 3 companies plus Europcar (including Goldcar and interrent brands) - and Sixt represent 65% of the market. In 2019 the car rental market represented around 90 billion dollars and analyst were very optimistic and expected a strong growth for the coming years based on new mobility trends. Everything has changed now!

Capitalisation of public companies

 

Europcar

Hertz

Avis

 

EUR

USD

USD

Capitalisation 24/04 (millions)

244

528

909

PER

8.82

-

3.29

Max 2020

4.27

20.29

50.34

Share value 24/04

1.58

3.42

13.08

Share value % loss

63%

83%

74%


Avis announced travel restrictions have contributed to an 80% plunge in revenue in April and now plans to cut costs by $2 billion this year. Moody’s downgraded Avis by two notches to B2. It cited Avis’ weakening liquidity as a result of the pandemic, with more pressure coming from reduced used car prices. The stock has already plunged 74% this year. Avis is also reducing compensation for executives and senior employees, pausing capital spending and curbing its fleet of vehicles

Hertz Global Holdings Inc. brought in restructuring advisers to rework the debt and avoid filing for Chapter 11 bankruptcy. The rental-car company’s shares are down 83% this year. With cancellations soaring and new bookings scarce, the company has been consolidating locations, cutting staff (10.000 redundancies) and reducing capital spending to preserve liquidity. However more pressure will come from weak used car prices.

Europcar, whose net debt increased by 32% last year has lost 63% on the stock exchange. The French state has intervened as guarantor of a line of loans worth 225 million euros requested by the car rental company to maintain the continuity of its business. Europcar has increased its size in the recent years through acquisitions based on concepts such as new mobility which at the moment only generate losses. That acquisition policy has generated an enormous goodwill of 1.2 billion euros.

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