Insights: Trends driving the UAE car rental sector

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The car rental industry is experiencing dynamic shifts driven by evolving consumer preferences, sustainability concerns and technological advancements.

Here are insights into trends impacting the car rental sector.

Are EVs disrupting the sector?

Electric vehicles (EVs) are rapidly gaining traction, reshaping the future of transportation and how people get around. However, EVs are not widely utilised in the car rental industry due to two primary factors. First, there are challenges related to the acceptance and adaptability of EVs, particularly for individuals living in apartment complexes where charging infrastructure is lacking. This absence of charging options creates a major deterrent for people looking to rent or use EVs, as they often have to rely solely on public charging stations.

Additionally, many potential users are not well-informed about the available charging stations and the overall charging network, further limiting the appeal of short-term rentals.

Furthermore, long-term rentals of EVs have not gained significant popularity, mainly because EVs still carry a relatively high upfront cost compared to traditional vehicles. In addition to cost concerns, individuals residing in apartments typically lack the necessary charging infrastructure in their residential complexes.

Nonetheless, this situation can be more favourable for those who live in villas, penthouses, or townhouses, as they often have dedicated parking garages where they can install private charging stations or access a more extensive charging network to recharge their EVs.

Future demand will depend on how manufacturers introduce EVs to the market and the price point at which they are offered, which will play a crucial role in their acceptance and adaptability.

Rising demand in luxury car rental segment

There has been a significant increase in demand within the luxury car rental segment. This surge in popularity is primarily attributed to the flexibility and accessibility offered by long-term rentals. Furthermore, there is a growing trend where individuals opt for one-year rentals and subsequently switch to a new model.

This trend is driven by the desire to stay up-to-date with the latest vehicle models, as cars quickly become outdated with the arrival of new models each year, such as transitioning from a 2023 model to a 2024 model.

Customers prefer to align themselves with the current market trends, and businesses that can provide such options are thriving in the rental market, particularly in the luxury segment.

What cars are doing well in the rental space

As vehicle costs have increased with the rise in interest rates, we have observed a significant surge in demand within the economy and compact SUV segments. This surge notably occurred during the third quarter, coinciding with the return of parents and teachers to school-related activities, which played a substantial role in this year’s market dynamics.

We experienced a robust and impressive quarter, characterised by remarkable growth. However, when we examine the situation from a specific perspective, we can see that the economy and compact SUV segments are currently experiencing significant growth. Furthermore, even in the context of long-term rental requirements, the luxury segment has displayed promising and noteworthy performance.

Short term or long-term rentals?

From our perspective, we have witnessed strong demand, driven by the expectation of increased tourism in Dubai as the number of visitors grows. We anticipate a balanced 50-50 split in market demand, with both short-term and long-term rentals playing significant roles in the rental market in the foreseeable future. This trend is expected to continue as Dubai attracts more tourists and visitors.

The writer is the CEO of Selfdrive.ae.