Recall, it was just weeks ago that we pointed out how a crash in used car prices could be putting significant pressure on the rental car industry. That is, obviously, in addition to the fact that nobody is traveling.
Since then, it has been rumored that Hertz has hired advisors to consider a bankruptcy and the auto industry has placed a major bet on incentives to try and move inventory off of their lots.
But automakers are about the feel the brunt of the chaos in the rental car industry, as both Hertz and Avis have put stops on purchases and, in some cases, re-directed purchases they’ve already made to additional parking lots, according to Bloomberg.
The companies have cancelled “all orders of GM vehicles for May, June and into July”.
This has left GM and Hyundai taking back cars that it had agreed to sell to Hertz, Avis and Enterprise. Last month, Fiat underwent efforts to try and redirect almost 30,000 vehicles these companies had purchased, but was unable to transfer them.
The chaos continued this month when Avis had to sell $500 million in junk bonds and Hertz was granted a last-minute concession from its lenders to narrowly avoid bankruptcy.
Rental car sales fell 77% in April and Fiat was the hardest hit with loss of total fleet sales, according to Cox Automotive.
Avis has said it is expecting revenue to fall 80% for two months in a row. Hertz said it doesn’t expect to acquire new vehicles for the rest of the year. Meanwhile, delivery to fleet customers represents about 20% of carmakers’ total business.
Recall, we wrote just days ago that automakers were having so much trouble finding space for their vehicles that ships from overseas were being denied entry at ports and sent back out into the ocean.
Bob Carter, executive vice president of sales at Toyota Motor Corp.’s North American unit said: “There was virtually no business last month in the fleet industry. As we transitioned to people not traveling, the rental-car demand dropped precipitously.”
