Larger vehicles preferred as APAC vehicle rental market hit $48B

Enhanced services and changing preferences drive significant growth.

The Asia-Pacific tourism vehicle rental market is expected to reach $48 billion in the next five years, according to a report by Mordor Intelligence. This surge is attributed to several advancements and shifts in consumer preferences impacting the way rental services are provided to customers.

Ravi Teja Kumar Reddy Mayaluru, Project Lead, said that customers are increasingly seeking larger vehicles, transparent pricing, improved infotainment services, and enhanced customer service. 

"Earlier...the majority of the vehicles that were rented for tourism applications were hatchbacks and compact sedans," Reddy stated. However, there's been a noticeable shift toward more spacious vehicles such as multi-purpose vehicles (MPVs) and sports utility vehicles (SUVs), influenced by rising disposable incomes and improved affordability in countries like India, Thailand, Indonesia, and Vietnam.

The spike in tourism and leisure travel post-COVID-19 has impacted vehicle rental demand. The Asia-Pacific region has seen a recovery, with international visitor arrivals soaring to 93.34 million in 2023, marking an increase of 127.4% compared to the previous year. 

This resurgence is largely driven by intra-regional travel and visitors from America. Reddy attributed the growing vehicle rental demand to several factors, including the expanding middle class, increased business travel, and the availability of affordable rental services. 

He said that for instance, in India, chauffeur-driven rental services can start as low as $1.5 per hour, with the average price across the region being less than $50 per day.

Moreover, changing travel preferences significantly influence the tourism vehicle rental market. The shift from chauffeur-driven to self-driven rental services highlights the evolving needs and independence of travellers in developing nations like India and Japan. 

This trend aligns with the increasing utilisation of smartphones and internet access, facilitating the ease of online bookings. Reddy predicts a notable shift towards digital platforms, expecting that "more than 70% of the vehicle rental bookings in the Asia-Pacific region happens with the online platforms" by the end of 2029.