UAE car rental and leasing industry is expected to flourish with a revenue of more than AED 3 Bn by 2025- will the development of business environment help the market to achieve its targeted growth?

Entry of new domestic and global companies in the car leasing space to lead the growth of fleet size to meet the rising demand of the customers, as per a report by Ken Research

1. The UAE Car Rental and Leasing Industry is a highly unorganized industry that is home to several car rental and leasing companies- 60-70% are Small Fleet Operators.

Other Challenges in UAE Car Rental And Leasing Market

• 100+ players with majority of the players around Dubai, Abu Dhabi, Sharjah and Fujariah.
• Includes companies such as Butterfly rental, 111 Rent a Car LLC, 24*7 Car Rental.
• Prefer non commercial locations for opening up rental space to cater especially to local demand.
• Has majorly On spot booking option only.
• Strong competition from aggregator based platforms which have been expanding rapidly. Customers are directly able to compare price of the SFOs with that of players on aggregators’ portals, resulting in lower translation into sales.

2. Operating model of car rental companies in UAE– Cars are being majorly rented out on-airport locations by customers.

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• Car rental companies charge a premium price for on-airport locations as compared to off-airport locations. Consumers can Book a car via web or direct app/ aggregator app or call/ kiosk mostly for a period of 3-5 days.
• 80-90% of Fleet sourced on Financial Lease basis at approx. 1.5%.
• Used cars sold at an average of 40% of the original car value after 3 years (depreciation considered as 40-45% in 3 years).
• Used Cars are auctioned offline or via online auto classified platforms.

3. Car Rental Demand in the UAE is driven by Economy Segment majorly being rented for 0-1 months.

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• Economy class segment are the most preferred rental option as they are more fuel efficient and cost effective.
• On an average, a rental car in the UAE costs AED 175 per day
• excluding fuel which is incurred by customer at unlimited mileage.
• SUV class segment are rented majorly by families as they have more seating space and luggage space.
• Luxury cars are rented by corporate majorly for business related travel.
• Rental services are hired for a short rental plan of hourly, daily and weekly duration from Airport as well as outside Airport locations.