Car rental and ground transportation providers are
responding to the “acceleration” in interest among corporates in reducing their
carbon emissions since the start of the Covid-19 pandemic, according to Advito
principal Olivier Benoit.
While air has been the primary focus for reducing emissions,
followed by hotel, corporates have become more carbon-conscious across all
supplier categories. “They are now looking more into car and rail,” Benoit
said. “They are moving from a pure air [strategy] to a multimodal approach.”
Corporates are asking, “How can I pick up a contract with
the green guys in the industry?” added Benoit. “There’s more and more
discussion with our clients around which suppliers are green, what can we
negotiate in our contract with them, what are the offerings.”
The problem, said Benoit, is that the viable options are
pretty limited.
Unlike airlines, which are including carbon offsets in fare
categories and providing corporates with options to donate to sustainable
aviation fuel, ground transportation suppliers aren’t as advanced with their
specific contracting offerings, Benoit said.
“When it comes to a very specific contracting policies, my
opinion is that they are less advanced than what air and hotel suppliers are
doing today,” he said. “When we engage [car rental companies in a request for
proposals], for example, they will not come with specific contract options
related to sustainability,” he said. This is due to the fact that supplier
flexibility in the car rental space is dependent on what their manufacturer
partners can provide, he said.
Conversations Are Evolving
Even so, conversations about sustainability and ground
transportation options are happening, and they are more global than before.
National Car Rental SVP of business rental sales and global corporate accounts
Don Moore said National is talking to more corporate clients in North America
about sustainability, whereas these discussions pre-pandemic mostly were with
customers in Europe.
Where car rental suppliers are taking the most significant
steps are in fleet investment, especially fleet electrification.
“All the major car rental suppliers are increasing their
share of hybrid and electrical vehicles in their fleet, and it’s accelerating,”
said Benoit.
“We are working very closely [with manufacturers] to add
vehicles from a low-fuel hybrid to electrical vehicles,” said Moore. “That is
in our long-term strategy.”
Likewise, Avis Budget Group in 2020 established a goal to
reduce its greenhouse gas emissions by 30 percent by 2030, with a focus on
fleet optimization and efficiency.
“Our efforts … are rooted in three approaches: fleet
optimization, which includes enhancing connected vehicle technology;
introducing fuel-efficient and low-emission vehicles; and expanding car sharing
solutions through our Zipcar brand and partnership initiatives,” according to
Avis Budget Group sales SVP Beth Kinerk.
As the fleet evolves, however, the business model also will
need to follow, according to Benoit.
“I don’t feel the business model for electric car rental is
completely mature today,” he said. Fleet electrification continues to be
hampered by local infrastructure and battery technology and travel buyers will
be limited to what their travelers will conceivably use. Because of that, he
said, electric vehicle options “haven’t become a focus point” in negotiations
with car rental and ground transportation partners. “It has not come to a
tipping point.”
The demand may be shifting more quickly in Europe, according
to Sixt global sales director Stuart Donnelly. He said the Pullach,
Germany-based mobility giant was “increasingly adding hybrid and electric
vehicles to our fleet,” in a response to customer demand for more electric
vehicles. “Feedback from our customers has been to ban ICEs [internal combustion
engines] completely from their fleets and become carbon-neutral by 2025 or
2030,” said Donnelly.
Meeting that goal will require more electric vehicle
production from manufacturers, and according to recent announcements those
plans are hitting the pipeline, even in North America.
In March, General Motors announced it would end production
of diesel- and gasoline-powered cars, trucks and SUVs by 2035 and shift its
entire new fleet to electric vehicles as part of a broader plan to become
carbon-neutral by 2040. Toyota plans to have 40 percent of its new vehicle
sales be electrified models by 2025 and nearly 70 percent by 2030.
Europe’s biggest car manufacturer, Volkswagen, has announced
a goal to sell more than 2 million electric vehicles by 2025, in hopes of
displacing Telsa as the market leader in electrified vehicles.
Indeed, the global electric car rental market is projected
to reach around $15 billion by 2025, according to Market Research Future. And
in some countries, regulators are getting involved.
“The governments are driving the transition as well,” said
Donnelly, noting the UK’s November 2020 move to ban sales of conventional ICE
vehicles by 2030 and hybrids by 2035.
Roadblocks
“[Car rental suppliers] have to purchase what the customers
want,” car rental consultant Neil Abrams said. “Within that framework, they are
also being dictated by what the manufacturers are building. The reality is that
manufacturers are going more and more toward electrification. It’s evolving at
an accelerating rate. We are going to see more and more electric vehicles in
fleet.”
There’s a question, however, whether corporate travel demand
ultimately lines up with consumer demand. Some buyers told BTN they have to
limit their requests specifically for EVs because they there’s a good chance
travelers won’t use them frequently—for a variety of reasons. Right now, cost,
convenience and infrastructure are all limiting factors.
“It’s difficult because we don’t want to add costs to the
vendor to provide a vehicle that our employees aren’t going to use,” said State
of California business partnership and travel manager Bill Amaral. “ We have to
get to the point that if we are going to ask our vendors to [introduce] more
electric vehicles in their fleets, we have to make sure our employees use those
vehicles.”
A big reason electric vehicle adoption remains low among
business travelers is American and European infrastructure doesn’t adequately
support electric vehicle use. Electric vehicles require an extensive charging
station network. While suppliers provide apps to help drivers find them, it’s
not enough if travelers need to span distances. “If you have to use an app to
go find a charger, that’s telling you something—that [charging stations are]
not prevalent out there,” Amaral said.
Ground transportation consultant David Kilduff said the
same. “EV cars are coming but there are very few charging stations for that,”
he said. “It’s not like a gas station where we pull up and fill our tank and
out in seven minutes. It’s not the case. It takes X amount of time depending on
the model to charge one of these, so it’s going to look very different. There’s
going to have to be way more charging stations than pumps. Then, you have to
have the additional area in order for cars to sit there and charge.”
On top of scarce charging stations, vehicle batteries don’t
enable drivers to get very far without charging. “Battery technology is going
to improve, but right now, they take quite a long time to charge,” said
Kilduff.
These issues combined with today’s batteries can lead to
long wait times as well as anxiety for travelers. “I had an electric vehicle
from 2015 to 2018 and one of the lessons I learned personally is to never pass
up an opportunity to charge because they had become a lot more popular,” Amaral
said. “I was always battling people to get a plug here at my department and
infrastructure was a big thing, but I think for most people it was the range
anxiety.”
At this time, a full electric or hybrid fleet isn’t possible
for car rental suppliers, according to Moore. “You couldn’t launch a full
electric or hybrid fleet today because you don’t have all the outlets you
need.”
Transforming infrastructure
is a monumental task. “Every rental car company, hotel, motels and other
businesses are going to have get charge stations, which means land, which means
infrastructure change,” said Kilduff. “It’s not simple. It is complicated, and
it’s going to be an evolution.”
Path to Maturity
While the road to electrification seems long, the alignment
among key stakeholders points to optimism. “Manufacturers, corporates and
governments are pushing pretty hard now, so I think you’ll see faster movement
than you did in the past,” said Moore.
Manufacturers and their partners are investing in expanding
the charging station network and making more efficient, cheaper batteries.
Volkswagen, for example, said it would have 18,000 charging stations across
Europe by 2025. Volkswagen said would cut the cost of batteries by up to 50
percent by the end of the decade, while slashing charging time to 12 minutes.
The electric vehicle charging station market is expected to grow by $22.02
billion during 2021-2025, according to ResearchAndMarkets.com.
Car rental suppliers are taking steps now to
prepare for an electric vehicle future. “I will tell you, whenever we are
renewing a location or getting a new location in a certain area, we are making
sure they have power outlets for charging vehicles,” Moore said. “That’s
definitely in our plan in the long term.”