Post date: 01-03-2024
The market share of electric vehicles (EVs) has seen significant growth over the past years, evolving from a niche segment to a significant player in the automotive industry. This growth has been driven by factors such as technological advancements, government incentives, environmental concerns, and changing consumer preferences. Initially, EVs were niche products with limited market penetration, but breakthroughs in battery technology, coupled with supportive government policies and increasing environmental awareness, have led to a steady increase in market share. Automakers worldwide are investing heavily in EV development, introducing more affordable models, and phasing out internal combustion engine vehicles. As a result, EVs are becoming increasingly mainstream, with forecasts indicating continued growth in market share in the coming years.
EVs are thought to offer lower operating costs compared to traditional internal combustion engine vehicles (ICEVs) due to several factors. EVs benefit from lower fuel costs, as electricity is often cheaper per kilometre than gasoline or diesel. They also typically require less maintenance since they have fewer moving parts and don't need oil changes or exhaust system repairs. Especially in the European Union, EVs have been heavily promoted through regulation as a means of achieving environmental goals: in 2023, EU countries approved a law that will require all new cars sold in EU to have zero CO2 emissions from 2035 and onwards.
Integration in the car rental business
Several major rental car companies have embraced EVs as part of their vehicle fleets, driven by factors such as increasing customer demand for sustainable transportation options, corporate sustainability goals, government incentives for EV adoption, and partnerships with automakers. Customer reception of rental EVs varies, but there seems to be a growing interest among environmentally conscious travellers and those intrigued by the latest automotive technology. EVs also appeal to customers due to their, smooth driving experience, and potential fuel cost savings.
However, customers have also been expressing concerns that have affected rental car companies’ rate of EV adoption. Several technological uncertainties still afflict EVs, including battery performance, limited range, long charging times, and concerns about battery lifespan and efficiency in extreme temperatures. Another significant concern is the availability and accessibility of charging infrastructure, requiring improvements in the number of charging stations, standardized protocols, and faster charging speeds, especially in countries without widespread EV adoption like Greece. Even the eco-friendly nature of EVs has become a point of dispute by people who consider electric energy to only be sustainable when it is produced by renewable sources. The issue of drivers being unfamiliar with the peculiarities of driving EVs compared to ICEVs should also not be underestimated.
Accessing the opportunity
Where others see a mountain of challenges, an ambitious entrepreneur may spot a chance to claim first-mover advantage into an enterprising new market. The aforementioned concerns about EVs are mainly things which are expected to be ironed out by technological advances, public infrastructure investments, and further shifts in consumer behaviour. Meanwhile, the timer dictated by climate change concerns and EU regulations is ticking towards a day when rental car companies might be essentially forced to switch to more environmentally-friendly vehicles.
To establish an EV rental business, one should first consider the many factors that will influence the potential of such an undertaking. For example, thorough market research will be required to assess competition, investment prerequisites and the preferences of potential customers. Are there prospective clients in the area of investment, such as environmentally conscious travellers or tech-savvy professionals? How many competitors offer a similar service, and how will your offering be differentiated? Is there sufficient charging infrastructure in the area? Budgeting such an operation will also require careful planning and value assessment, especially considering that even after potential government subsidies, EVs may still be significantly pricier than traditional vehicles of the same class. Compliance with business regulations should also be ensured, and there may be several third parties that the entrepreneur will have to liaise with for licenses and permits, like government services related to Tourism or Transportation.
Even if all requirements for setting up the business are met, it will not flourish without a marketing strategy that will showcase the offered service while catering to the specific needs of the local audience. The very business model of such an enterprise might have to be drastically different from traditional rent-a-car schemes. For example, we know that some EVs have features which are operated via a mobile phone app. We could easily assume that customers might expect to have this kind of convenience in more aspects of the car rental service, like booking their car or reaching through to customer service.
This could be the right time
At Strategy Lens we have years of experience supporting businesses that belong in the Tourism Industry. If you are keen to get involved you could defer some of the aforementioned complicated tasks to our experts, and focus on building the business of your dreams.
It might also be an opportune time to do so: in the current crop of NSRF initiatives for SMEs in Greece, car rental services are listed for eligibility to receive up to 60% of the initial budget required to set up a new company. Among other expenses, the purchase of EVs is subsidized. The deadline for these initiatives has been pushed to the 22nd of March 2024.
Has this article piqued your interest? Do you think it might be a good time to get involved and adopt a business model that might transform an entire sector in the decades to come? If so, feel free to fill in any of our contact forms and we can take it from there. You may contact us through a request for a proposal, or have us call you to schedule a session.
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About the author: Nick Kanellis is a Market Development Consultant at Strategy Lens. He supports the process of launching new products and services, liaising with clients at every step from the initial design, up to market entry and promotion. You can reach out to Nick at nkanellis@strategylens.com or by phone at +30 2614 409 251.