Automotive > Autonomous Vehicles Blog

Can Tesla Save Hertz?

by Roger Lanctot | May 12, 2020

Hertz has an earnings call this morning. Things don't look good and a bankruptcy filing is not out of the question. The current results are not awful, reflecting as they do activity through the end of March, but events in April took a nasty negative turn.

The company notes in its earnings press release: "We started the year with positive momentum, extending the strong growth trajectory of the past three years, reflecting consistent increases in both price and volume, productivity improvements and best-in-class fleet management," said CEO and President, Kathryn V. Marinello. "Yet in just two months, the outbreak of the coronavirus created a major business disruption as global travel demand dropped to almost zero and the U.S. used-car market effectively shut down. We immediately shifted our business priorities to focus on employee and customer safety, expense mitigation and preserving liquidity."

The problem for Hertz - and Avis and Enterprise and Sixt et. al. - is their collective dependence upon the airline and tourism industries. As much or more than 50% of rental car business derives from airport-centric transactions. It is for this reason that these companies may want to reconsider their prospects in the context of the emergence of semi-autonomous cars such as Super Cruise-equipped Cadillacs from General Motors or Autopilot-equipped vehicles from Tesla Motors.

A study published in 2018 by Stephen Rice and Scott Winter of the Embry-Riddle Aeronautical University considered the decision-making parameters of potential flyers in the context of the availability of driverless vehicles. The study highlighted the significant time differences between flying and driving between major U.S. cities and offered the option of a manually driven vehicle or an autonomous vehicle.

Typically, the study respondents preferred flying to driving by upwards of 85% with that figure falling as low as 70% when the consideration of needing a car at the destination was added to the proposition. The onset of the COVID-19 pandemic has added yet another consideration - safety - that may suddenly make autonomous or semi-autonomous vehicles an even more attractive option than flying.

The study provocatively suggested that autonomous vehicles might disrupt the airline industry as consumers increasingly opt for driverless delivery to their destination. In a post-COVID-19 world, the airline and automotive industries have both been disrupted along with the rental car industry.

In fact, the rental car industry has been devastated, as will no doubt be reflected in the comments of senior executives at Hertz. It is possible, though, that rental cars might leverage semi-autonomous driving technology to improve their currently dismal outlook and separate their long-term prospects from the airline industry upon which they are too dependent.

Airlines face the challenge of overcoming both travel bans and customer trepidation over sitting in close proximity to other passengers for multiple hours. The airline industry has yet to create a sufficiently safe in-flight protocol capable of reassuring the general public that it is A-OK to hop on a plane. Mass transit operators face the same hurdle.

There's no reason rental car companies should be impeded by the limitations of flying. It's time for some creative solutions to enable more long-distance drives and rentals - while giving customers access to the latest assisted driving technology.

Semi-autonomous driving may represent an essential path to recovery for the rental car industry. In this time of COVID-19, it's certainly no longer a far-fetched idea.

Embry-Riddle study results: https://commons.erau.edu/ijaaa/vol5/iss1/3/

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