The Rental Car Apocalypse Has a Terrible Sequel

If you’re itching for a dream vacation this summer after two years of travel restrictions, then you might end up paying more to rent a car than you spend on a plane ticket. And when you reach the front of the queue at the rental counter, don’t be surprised if you’re handed keys to an older vehicle or an unfamiliar brand.

Your inevitable frustration reflects a shortage of new cars amid the post-pandemic travel rebound that’s helping big listed lessors like Avis Budget Group Inc. and Hertz Global Holdings Inc. rack up windfall profits. Analysts expect Avis to earn almost $2 billion of net income in 2022, which is more than it made in the years 2010 to 2019 combined.

The companies hope to retain higher pricing even once supply and demand rebalance, which now probably won’t happen before next year. But the rental firms risk a backlash if they gouge consumers, and investors should ponder if this historically very competitive and low-margin industry has really changed its spots.

To recap, in 2020, rental-car companies slashed costs and shrank their fleets when Covid emerged and Europcar Mobility Group and Hertz ended up filing for creditor protection. When leisure trips roared back last year and pricing soared, cars were hard to come by and there was talk of a “rental car apocalypse.” Amid the hullabaloo, Avis and Hertz became meme-stocks and announced multibillion-dollar share repurchases.