How Can Car Rental Product Managers Deal With Upstarts?

Established car rental firms are trying to overcome upstarts
Established car rental firms are trying to overcome upstarts
Image Credit: Don O’Brien

When you travel and you need transportation at the other end of your trip, what do you do? If you are like most of us, when you are buying your airplane ticket and making your hotel reservation you go ahead and call up an established rental car company and make a reservation. When you fly into the airport, you take the car rental bus to the car rental lot, pick up your car and you drive away. That’s all fine, but that is so old school. It turns our that there is a new way to get around and it’s changing the rental car product development definition and causing headaches for established rental car company product managers.

The Arrival Of The Upstarts

So what does this new world look like? The established way of renting a car involved you renting your car from a company-owned fleet of rental cars. The new way of doing things involves you using a smartphone app to rent a car from a private car owner. As you can well imagine, just exactly how you go about defining just exactly what a rental car is may now be up for debate. A number of different courts and legislatures are currently debating this issue. The big question is if peer-to-peer car-sharing services should be regulated in the same way that the more established rental car firms are.

The new car rental upstarts are represented by firms like Turo and Getaround. These firms allow people to use smartphone apps to rent their private cars out. As you can well imagine this is not going over well with the product managers at Enterprise Rent-A-Car and Hertz. Losing customers to upstarts is not going to look good on anyone’s product manager resume. The conflict that is arising between the upstarts and the established players sure looks a lot like the conflicts that occurred between Airbnb and the hotel industry and Uber and the taxi drivers. The upstarts are saying that they are simply a platform that connects customers to services while the established product managers are saying that they are direct competition. At the state level, more rules are being enacted to make the startups look more like the established firms in ways such as paying sales tax. One of the things that the states are struggling to do is to get the financial records of the startups in order to tax them.

The product managers at the established car rental companies have been under pressure for awhile. The arrival of the ride haling services (Uber, Lyft, etc.) have placed them under financial stress. In order to deal with the arrival of the newcomers, the established firms have been working with both airports and states. One of the first steps that they have taken have been to push for awareness of the startups among government officials and airports. These product managers believe that the startups should be required to play by the same rules that the established firms have to follow.

How The Established Rental Car Companies Are Meeting The Challenge

The product managers at the established car rental companies believe that the services that are being offered are same no matter who offers the service. They think that all firms that are offering this service should have to live up the same rules which include things like paying to operate at an airport and having to comply with state insurance rules. The startup firms believe that they are not traditional car-rental companies and so they should not have to be subject to the same rules as the traditional firms. They view themselves as being a “platform” and a completely different way of doing business. They view traditional firms as using consumer protection rules to try to block their growth.

The upstart firms believe that they are providing the owners of private cars with a way to earn extra income on an underused asset. Studies have shown that the average vehicle only spends 5% of its time on the road. The upstarts say that having the ability to rent out a car can help to offset the cost of owing a car at a time when the cost of purchasing a car is rising. The average cost of a new car recently topped US$32,000. If a car owner agrees to rent their car out, they can make up to $10,000 per year. In the U.S., there are currently 3 million registered users of car sharing services. When a car is being rented, the customer uses an app to select a specific car, the car comes with insurance, and then the customer works out an agreement with the car’s owner to determine where the car can be picked up.

The upstarts allow their customers to rent cars from the car owners for either an hourly or a daily fee. The average upstart car renter ends up paying $45 to rent a car for a day. The upstart firms are facing their own unique sets of challenges. In Illinois a bill that was promoted by the product managers at the established car rental firms voided the damage waivers for car rentals. This effectively changed the definition of renting. Now the definition of renting a car happens when someone other than the owner is driving the car. At the same time, some cities are trying to get the upstart firms to be charged like a traditional car rental firm. The cities believe that the upstarts are getting around the airport’s permit system. The upstarts contend that they should not be classified as a car-rental company.

What All Of This Means For You

The world of rental cars has been unchanged for a very long time. Travelers simply select one of the established firms when they need to rent a car. However, now things are starting to change. Upstart firms have arrived that allow private car owners to rent their cars to people who need transportation. This is causing a disruption in the industry and product managers at the established firms are having to go back to their product manager job description in order to find ways to deal with the changes.

Car rental customers are now able to use their smartphones and an app to rent a car. The established car rental companies are working with legislators to attempt to have the new upstart firms regulated just like the established car rental firms are. The car rental upstarts look a lot like the upstarts in other industries like Uber and Airbnb. The upstarts don’t think of themselves as a car rental firm, but rather as a platform that connects customers with a service. Established firm product managers are attempting to make it so that the upstarts are treated like traditional rental firms and have to pay sales tax. The product managers at the established car rental companies believe that the services that are being offered are same no matter who offers the service. The upstart firms believe that they are providing the owners of private cars with a way to earn extra income on an underused asset – up to $10,000 per year. The upstarts are dealing with states that are trying to redefine what it means to rent a car and airports who want to collect permit fees.

The arrival of a disruptive player in the car rental market is causing a great deal of problems for the product managers at the established car rental firms. They are going to have to find a way to share a portion of their market with these new arrivals. The rules that govern rental cars will probably change, but how people rent cars will also change. The established firms product managers will need to determine how they can be successful in the new car rental marketplace.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Since the car renental upsarts are not going away, how should the product managers at the established firms deal with them?

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What We’ll Be Talking About Next Time

So here’s a quick question for you: what’s the most important meal of the day? If you said breakfast, then the product managers at Wendy’s would agree with you. Wendy’s has decided to once again make an attempt to expand their product development definition and start to offer breakfast items in an effort to attract more customers to their stores in the morning. The market for breakfast foods is a crowded market and the Wendy’s product managers may be up against some stiff competition: how can they be successful?