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SA's facing a rental car shortage – first thanks to lockdown, and now scarce semiconductors

Business Insider SA
Car rental South Africa
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  • When Covid-19 and its associated lockdown restrictions hit, South Africa's car rental companies sold off stock to stay afloat.
  • Now, travel is bouncing back and the same companies are looking to increase their fleet sizes to meet the growing demand.
  • But global supply chain disruptions and a shortage of semiconductors aren't making that an easy task.
  • For more stories go to www.BusinessInsider.co.za.

Car rental companies in South Africa trimmed their fleets during harsher levels of lockdown and are now struggling to restock amid global supply chain disruptions and a shortage of semiconductors.

Travel, whether for business or pleasure, has been a casualty of the Covid-19 pandemic. Border closures, flight suspensions, remote work directives, and a general reluctance to travel have decimated industries reliant on the movement of people.

Car rental companies responded to this downturn by downsizing their fleets. By December 2020, around eight months after South Africa first entered a coronavirus-induced state of disaster, the total number of available rental vehicles had dropped by 60%.

A year later, fleet sizes remained at half of pre-pandemic levels, with South African car rental companies tentatively attempting to replenish their stock ahead of the busy festive season. Supply far outstripped demand, according to Drive South Africa, which conducted a survey among 13 major rental brands.

The shortage of rental vehicles has shown little sign of improvement at the start of 2022, with travellers still advised to book well in advance as companies struggle to scale up. This has been made worse by the coronavirus' knock-on effect on global supply chains, especially for electronic components.

"All car rental suppliers anticipate that the manufacturing industry's semi-conductor shortage will remain in place for some time. It will continue to have a significant impact on their purchasing efforts worldwide," Rennies BCD Travel recently noted in an email to clients.

"The immediate effect is temporary shortages in the available fleet, which is expected to remain an issue for the foreseeable future."

Automakers cut their semiconductor chip orders in 2020 as vehicles sales plummeted. This, coupled with the long-standing issue of insufficient capacity at semiconductor factories and demand recovering faster than anticipated, has led to a shortage of semiconductor chips.

And although semiconductor manufacturers have rushed to increase production, delays in the supply of chips are expected to last for much of 2022. That's bad news for car rental companies looking to increase their fleet sizes and capitalise on the resurgence of travel.

"The car rental agencies are looking to increase their fleet now and the conductor shortage is making it more challenging," Ellena van Tonder, the sales and product manager at Drive South Africa, told Business Insider SA.

"There is a severe shortage of rental vehicles in South Africa affecting both short and long lead time bookings, depending on the type of vehicle the client wishes to rent."

South Africa's total industry fleet size is projected to be 75% of the pre-pandemic fleet size by 2023. But this all depends on how quickly the global semiconductor shortage can be resolved.

Motus, which represents more than 300 dealerships in South Africa and provides rentals via the Europcar and Tempest brands, reports that the shortage of new cars has led to a surge in demand for pre-owned vehicles.

"The industry is experiencing a short supply of pre-owned vehicles from car rental companies," a Motus representative told Business Insider SA, adding that the company had identified alternative sources of pre-owned vehicles.

Europcar and Tempest have been restructured with "costs having been reduced accordingly."

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