Car Rentals Go Hybrid

Published August 21, 2007

In case you haven’t looked at a newspaper, magazine or television show in the last year, the American business world is currently caught up in a game of environmental one-upmanship. The big car rental companies have joined the competition—and rental customers seeking greener alternatives will eventually be the winners.

Enterprise Rent-A-Car, Hertz, and Avis-Budget have all recently added a few thousand hybrids to their fleets. By the end of the year, Enterprise—the world’s largest automobile fleet in the world with nearly 700,000 vehicles—will have ordered about 4,500 Priuses. Hertz is aiming to have 3,500 hybrids in their fleet by the end of 2008, and Avis-Budget is not far behind, having just announced the purchase of 1,000 Priuses and 500 Nissan Altima Hybrids.

“That’s a drop in the bucket,” said Chris Brown, editor of Auto Rental News, a publication which monitors the car rental industry. Certainly, converting 1 percent of available rental cars to hybrids will have little effect on global climate change, but it’s one more small sign that going green and efficient is becoming a business imperative. “Let’s face it. The customer is driving this cart. Nobody wants to rent SUVs anymore,” said Brown. “The car rental companies have no choice, so they’re becoming proactive.”

Even if the rental companies wanted to quickly hybridize their fleets, they would face a number of logistical challenges. Toyota, the world’s leader in hybrids, allots only so many vehicles to fleets. In 2007, less than 5 percent of Toyota’s hybrids sales will go to fleets—and those are divided between government, corporate, and car rental companies. The rental industry will also need to change business practices to allow customers to reserve specific vehicles, rather than a vehicle class such as compact, midsize, or SUV. And it remains to be seen if fuel-conscious customers will simply downsize to a smaller vehicle to save on gas, rather than rent a hybrid—which can come with a premium based on its more expensive purchase price getting passed to the rental customer.

Enterprise and the other rental companies face similar challenges with its push for vehicles using E85, an 85 percent blend of ethanol and 15 percent gasoline. The company recently designated its downtown Washington, D.C. location as an “E85/Flexfuel branch,” where half the vehicles can use E85. Unfortunately, there is only one filling station in the Washington area that sells E85—about three miles from the E85/Flexfuel branch. Enterprise uses E85 to refuel vehicles rented at this location.

The more telling statistic for the rental companies is the average fuel efficiency of their entire fleets. In that regard, the race looks like a dead heat, with all the major car companies reporting that nearly half of their vehicles have fuel efficiency ratings of 28 mpg or higher—a figure which is almost identical to the average fuel economy of all new cars. The tie for greenest car rental agency may be broken by the company’s broader environmental programs. For example, Enterprise is underwriting the planting of 50 million trees, or 1 million trees a year over the next 50 years in national forests around the country. In a one-year program ending June 2008, Hertz is donating $1 to the National Park Foundation for every rental from their “green collection” (31-mpg or higher), with a guarantee of $1 million.