- The car rental and leasing market in the country is gaining popularity due to the increasing presence of online rental and leasing platforms. With 95.7% of the Saudi Arabia’s population having access to the internet, the presence of online platforms is expected to help the market grow.

- With growing online platforms, the car rental costs have come down significantly which is encouraging customers to rent a car rather than utilizing taxis or public transport for their trips.

- Another factor for the growth of market is that country has holy sites, like Mecca and Medina that witness a vast influx of tourists during Eid Al-Fitr and Eid Al-Adha festivals.

- As a part of Saudi Arabia’s vision 2030, the government is encouraging private organizations to set up their offices in the country. This is expected to increase the demand for corporate rentals and lease.

- COVID-19 has impacted the market growth due to the lockdown and travel restrictions. However, with restrictions being lifted, the market is expected to get back to its normal growth rate by the end of 2021.

Key Market Trends

The Increasing Demand for Online Car Rental Services

Online tourist vehicle bookings are increasing in the country and globally due to the rising usage of smartphones and growth in the number of users aged between 25 and 34 years, who prefer to book vehicle rentals through online channels.

Currently, online booking also serves a variety of purposes, such as verification of documents of the renter, offering information to the renter regarding the car, services like drop and pickup of the rented car at a certain place, e-signing contracts, and cashless transactions.

- These factors have helped car renting companies gain a competitive edge over their competitors during the past few years.

With the growing trend in technology, renting a vehicle through online booking has become the most preferred choice for customers over the past few years. Moreover, it provides additional facilities to monitor a rental vehicle’s operation, performance, and maintenance in real time. Such features are tremendous assets for drivers and fleet managers, enabling them to better and more efficiently identify risks and implement timely improvements of their rental services.

Furthermore, the trend of online renting a car through apps has improved over the period. App developers have been designing mobile rental applications with more advanced booking features that offer more vehicle availability and comparable rental costs on a single platform. For instance, in 2020, Ejaro introduced a licensed car sharing application in Saudi Arabia.

The application connects the car owners with people looking to rent vehicles. Startup only takes 20% of each transaction and the rest goes to the vehicle owner. In January 2021, the startup raised around USD 850,000 in seed funding from angel investors and BIM Ventures.

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Increasing Demand for Sports Utility Vehicles

In recent years, various startups that offer subscription-based cars have emerged in many countries. Similarly, in Saudi Arabia, startup Invygo has partnered with a local rental company to expand its presence in the country. For instance,

- In March 2020, Invygo signed its first car hire partner in Saudi Arabia. After the new partnership with Budget Rent a Car Saudi Arabia, Invygo started offering multiple brands of cars and the latest models for a monthly subscription.

- Previously, the company raised around USD 1 million funding in its seed round. Its operations starteded in Riyadh in March 2020 and extended to cities like Dammam, Jeddah and other KSA cities.

- Furthermore, in February 2020, after a partnership with Al Tayer Motors, the company included SUVs of various brands like Ford, Lincoln, and Land Rover, onto its app, while with the Al Habtoor Motors partnership, the company added Mitsubishi cars on its platform.

Most tourists prefer to rent a SUV in case of family outings, as it accommodate more persons and provides ample space for luggage while travelling.

The car rental market in the country is directly related to trends in the automotive market. If the sales of SUVs are increasing, service providers have to include the latest SUVs in their fleet to stay ahead of their competitors.

As per the aforementioned factors, it can be expected that the SUV segment’s growth will be higher as compared to other segments in the market studied.

Competitive Landscape

The Saudi Arabian car rental and leasing market is fragmented, and approximately 72% of the market share is held by major companies, such as Hertz Corporation, Budget Rent A Car, Hanco Automotive, Sixt SE, and Key Car Rental.

The Saudi Arabian car rental and leasing market is led by Hertz Corporation with about 22% market share, in terms of revenue, followed by Budget Rent A Car. Hertz has been one of the car rental leaders in the world and in Saudi Arabia. The company is expanding its Hertz My Car monthly vehicle subscription service across America to all corporate airports and neighborhood locations.

Budget announced that its short-term car rental business, which represents 30% of its fleet, was hit by the Kingdom's precautionary measures to curb the COVID-19 pandemic, like closure of airports, temporary suspension of Umrah, and imposing a 21-day curfew. All these factors have impacted Budget’s revenue as well as that of other players in the market. However, now demand is gaining pace gradually and is anticipated to grow swiftly over the forecast period.

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