Supply and Demand Analysis

Essay by billyg April 2005

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Supply and Demand-How it Relates to the Auto Industry


Customers had begun to find different ways to solve their transportation problems. The luxury of renting a vehicle was outweighed by the opportunity to save money. This trend continues today. According to this article on the Auto Rental News website, the fact that revenue numbers for the third quarter of 2002 indicate that the auto rental industry is continuing to slide and has posted reduced revenue in excess of five percent when compared to 2001. Attempts to increase demand were made in all areas of operation. Focusing on modifying marketing strategies, reducing prices, and collaborating with airlines to offer travel packages were just a few. Most importantly, auto rental companies have placed a greater emphasis on customer service. Customers can go to any rental agency for an inexpensive vehicle. However, a smiling, courteous rental agent could make the difference and bring the customer back again.

Today's lower demand has forced the auto rental industry to rethink its previous life of luxury; customers have become prized possessions. As the demand curve has shifted drastically for the auto rental industry, we have been scrambling to find equilibrium.

Tomorrow may bring remarkable changes for the auto rental industry. It is doubtful that any changes will be seen in the short term. However, a new thinking within the industry, coupled with a fresh approach to handling the customer could be part of the solution. Currently, the supply of available rental vehicles far exceeds the public's demand and the curve has shifted dangerously away from the equilibrium that is required to keep our industry strong. A dramatic change within the market place is necessary before auto rental companies can begin to rebuild. This change is likely to take years to commence. Eventually, rental...