Among the many industries expecting to do well at Expo 2020, the car rental sector is definitely one to watch, with the influx of a predicted 25 million visitors to Dubai during Expo translating to a vast amount of people needing transport. And experts believe the market is due for a correction.
But back to the present, the market looks buoyant. A recent Euromonitor International report states that the market is growing at a compound annual growth rate of 10 per cent year-on-year, and by 2017 is set to reach a value of Dh2.1 billion, up 59 per cent from 2012.
Big players are taking the opportunity seriously, with companies like Shift Car Rental – part of car dealer AW Rostamani Group – announcing it will invest Dh400 million over the next five years to expand operations. The cash injection will help the car rental unit double its fleet and expand across the UAE through a large number of car rental counters.
In Abu Dhabi, Fast Rent A Car has also announced plans to invest Dh60 million ahead of the Expo and open ten new outlets at different locations.
“In the last six months we have seen a surge in customers looking to rent a car in Dubai,” says Vinay Pagarani, Brand Manager at oneclickdrive.com. “This can be attributed to the fact that buying a car is too much commitment for an individual or company, as well as the fact that securing a bank loan isn't as easy these days.
"More and more residents are considering long-term rentals, with monthly or even yearly car lease plans. The benefits abound, especially in the current market scenario.”
However, traditional auto rental firms are facing competition from technology and social media as new players enter the mix, with mobile apps such as Dubai based u drive, an Uber style app allowing users to pay as they go.
“Dubai’s ever-changing need for transport solutions, the transient nature of life, and the overriding costs of car ownership make pay-as-you-go car rental a viable alternative,” says Hasib Khan, Managing Director, u drive. “For those who don’t want to commit to ownership, or don’t need a car every day of the week, u drive makes the perfect option.”
Pagarani at oneclickdrive.com says his company is not fazed by the tech attack.
“We believe the u drive model won't hamper the auto rentals market in a big way. Of course, single day basis rentals might unavoidably decline but then again their subscription model and rates make a four-hour rental more expensive than a full-day rental. In fact, we believe the predominant car rental market will give u drive a tough fight. The app craze will die down once users understand that they receive better rates renting cars traditionally.”
So who actually opts for rental drives in Dubai? Well, mainly tourists and business visitors to the emirate – but expat rentals are booming too.
Sebastian Tontsch, a photographer in Dubai has rented a car for more than a year and says the appeal of leasing a ride lies in the freedom that comes with the choice. “I think in general Dubai is well priced for renting a car and it gives you a come-and-go freedom that owning a car doesn’t. And in the hot weather who needs the headache of car maintenance and repairs?”
Dubai's car rental market is still in its nascent stage, according to Pagarani. “Not in terms of the cars being provided but in the service on offer,” he says. “Price over service has left the market in a state of confusion and customers still expect lower prices from better serviced companies. We believe car rental rates in Dubai are due for a correction.”