March 9 (Reuters) – The $100 billion western rental car industry, awash with cash from a profitable pandemic, is gradually getting its electric show on the road and Chinese-made vehicles are poised to play a starring role .

The electric transition could see car fleets long dominated by big-name brands from the United States and Europe increasingly migrating to Asian automakers, according to a European executive.

“In the past, European and American manufacturers had an advantage, but the shift towards electric vehicles is reshuffling the cards,” said Olivier Baldassari, group chief countries and operations officer at rental giant Europcar (EUCAR.PA).

He said electric cars from Chinese and Asian manufacturers are comparable to Western models in terms of quality, citing Great Wall Motor’s Ora line (601633.SS), but generally cost less.

Even small savings matter in the massive rental industry, which buys millions of new cars each year — a tenth of all new cars in the United States alone — and provides a leading indicator of broader car trends in society.

Companies in the industry have long resisted a rush to electrification as customer demand for electric vehicles (EVs) has been weak and fears of running out of power.

However, several analysts said now is the best time to start, as companies have bolstered their coffers with record profits during a pandemic that has emptied public transport and airports and resulted in more vacation trips within driving distance.

In the United States, rental car companies made record monthly sales of $1,320 per vehicle in 2021, according to the American Car Rental Association. That’s about $1,000 before the pandemic.

“In the past, companies have stuck their heads in the sand,” said Nick Mountfield, associate partner at OC&C Strategy Consultants, which advises rental car companies, on electrification. “We’re now starting to see people saying they need to do something about it and make plans.”

U.S. Rental Fleet Graphic: https://tmsnrt.rs/34PGDVK

US Rental Car Revenue Chart: https://tmsnrt.rs/3JHCORx

WATCH YOUR SPEED

Hertz (HTZ.O) was an early riser last October when it announced plans to purchase 100,000 vehicles from US pioneer Tesla (TSLA.O), increasing pressure on rivals to formulate transition plans.

France-based Europcar, meanwhile, has pledged to make 20% of its fleet electric or low-emission hybrid vehicles by 2024, up from 3% currently, meaning it will need to buy up to 70,000 cleaner vehicles over the next two years , as it stocks its fleet up to the 350,000 vehicles it owned before the pandemic.

Rental companies sold their fleets as demand collapsed early in the pandemic, struggling to regain volume amid a global semiconductor shortage that has hampered vehicle production.

Baldassari said Europcar is increasingly sourcing electric vehicles from Great Wall Motors, SAIC Motor (600104.SS) and Polestar, which is owned by Chinese company Geely [RIC:RIC:GEELY.UL] and Volvo Cars (VOLCARb.ST), but also bought from traditional partners including Renault (RENA.PA) and Stellantis (STLA.MI).

However, the company’s China strategy could change if German carmaker Volkswagen AG (VOWG_p.DE) manages to finalize its bid to buy the company in the second quarter.

Industry players operate at different speeds, each making their own calculations based on their markets.

In the United States, where many customers prefer SUV and pickup models that don’t yet need electrification, and public charging infrastructure is lagging behind in much of Asia and Europe, Enterprise Holdings is adopting a more cautious tone.

Electrifying just a quarter of Enterprise’s fleet at Orlando Airport — its largest consumer rental location — would require the same amount of daily electricity needed to power more than 1,000 homes, said Chris Haffenreffer, associate vice president of innovation at Enterprise.

Haffenreffer said the group currently has several thousand electric vehicles in North America, including from Tesla, Nissan, Hyundai (005380.KS), Kia and Polestar. While the company said it is in talks with all global automakers, it has no immediate plans to increase that stake.

“At a high level, we want to be guided by what our consumers are looking for,” he added. “Many car rental companies have taken this wait-and-see approach in the past because we are still in the early stages of the transition.”

US Industry Vehicle Purchases Chart: https://tmsnrt.rs/3gXAVnj

ATTITUDE IN THE WEST

The varying pace of change and the timeline for major fleet overhauls mean that gas-powered vehicles are likely to remain the main buyers for a number of years to come. Global automakers as a whole have transition plans for EVs to account for at least 40% of their sales by 2040.

Ultimately, however, the shift could prove far-reaching for Chinese fortunes at automakers in Europe, a crowded, competitive auto market dominated by big-name brands that has historically proven tough to crack.

In recent years, they have struggled with the perception that China, combined with cheap mass production, cannot compete on quality. But such arguments are challenged in a new reality, where leading Western automakers like BMW and Tesla are now producing cars in the country, which is a technological powerhouse and the world’s largest auto market.

Great Wall Motor, one of Europcar’s suppliers, is expected to launch its Ora Cat compact electric car in Europe this year at a price of around 20,000 euros (US$22,260) with a range of around 250 miles (400 km) and itself thus joining a growing number of Chinese electric vehicle makers are trying their luck on the continent. Continue reading

Chinese manufacturers using the rental channel to build brand awareness and increase sales volumes are following a playbook that Kia and Hyundai used to gain a foothold in Western markets in the 1990s, OC&C Strategy’s Mountfield said.

Reporting by Tina Bellon in Austin, Texas; Editing by Pravin Char

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