Chip shortage will keep car rental prices high, warns Europcar chief

Higher costs for car rental are likely to last until the auto industry’s production squeeze caused by the semiconductor shortage is resolved, the boss of Europcar has warned.

Caroline Parot, chief executive of the largest listed car hire company in Europe, said prices had risen because providers could not source enough vehicles to meet demand from holidaymakers.

Charges are two or three times higher than normal in many popular locations, according to consumer groups and price comparison sites. Higher car rental costs helped drive US inflation to its highest level since 2008 last month.

“We cannot serve everyone we want to because there are not enough cars,” she told the Financial Times.

The chip crisis has led to an acute shortage of new vehicles, with carmakers prioritising retail sales and other channels ahead of rental car providers, which tend to buy in bulk at lower prices.

“People are eager to travel. If you look at the US, there are enough hotels and enough flights, but the car capacity has changed,” she said.

While a lot of international travel in Europe is curtailed, people are increasingly travelling within their own countries.

Parot warned that the rental industry, similar to much of the leisure and tourism sector, has been further hampered by confusion from governments on travel corridors, particularly from sudden and unexpected rule changes.

“Each time a corridor is opened the reservations are exploding and we are full in 24 hours, but then if it is cancelled they are all gone,” she said, saying the rules that governed a closure were never clearly explained.

“The co-ordination across nations is probably what is missing the most,” she added. “Every government is reacting differently.”

She added that the need to ship cars across borders in Europe at short notice and high expense had driven up operating costs, forcing prices even higher.

“If my costs are increasing to serve the customer, the customer will have to pay for it, or I am not sustainable any more,” she said. 

The car industry is not clear when the chip crisis will end, with most manufacturers now expecting disruption into 2022.

Parot said she believes that Easter next year will be “more manageable”, even as demand is expected to return.

The company does not expect to reach pre-pandemic levels of demand until travel between Europe, the US and Asia has resumed, which the group is forecasting for 2023, she added.

Last year Europcar suffered a 45 per cent drop in demand, which still means more than half of its typical business was operating, as people in cities turned to rental cars to get access to private vehicles during the pandemic.

Earlier this year, the company completed a financial restructuring that wiped out €1bn of debt, but placed much of the business in the hands of its lenders.

This year’s revenues will be higher than 2020 levels, but not close to 2019’s because of the impact of the Delta variant, Parot said.

In the short term, the group has begun buying cars from dealerships and other channels as well as its traditional manufacturer orders to try to plug the gaps in its network.

However, lots of potential buyers are chasing available models, and the price of used cars has overtaken new vehicles in some segments.

Last month, the group turned down a €2.2bn takeover offer from Volkswagen.

Parot said that being owned by a carmaker would not necessarily make it easier to source vehicles during the current crisis, adding that the company had twice been owned by manufacturers in its history.

She declined to comment further on the takeover offer.