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I think that is suboptimal vertical integration. Hertz is a fleet buyer for a good reason; it doesn't want to be reliant on its Hertz Automotive subsidiary to
by linkregister 10y ago
I think that is suboptimal vertical integration. Hertz is a fleet buyer for a good reason; it doesn't want to be reliant on its Hertz Automotive subsidiary to meet a production quota. It doesn't want that capital expenditure. It wants to buy cars at volume and sell them as they depreciate.
- readams 10y agoHertz lives in an equilibrium where lots of people buy and operator their own cars. Autonomous cars may well move us to an equilibrium where most people do not own cars and instead rely on services. That totally changes the economics of the situation.
- linkregister 10y agoHow does it change the economics of the situation? More volume or shorter rentals? Would having more frequent rentals mean that rental companies would want to produce their own cars?
- kbenson 10y ago> It doesn't want that capital expenditure. Ah, but the car companies have already expended that capital. The problem here is they will have a lot of building capacity from all the factories they own, and possibly less to build with that capacity. There's nothing stopping them from buying extra needed capacity from another company, but in the meantime it may help them fill the lack of utilization they may see. At some point, some factories will need modernization as normal, and they can choose at that point to reduce factory capacity. The point is that it's a possible strategy to get them from point A to point B when they've already banked heavily on certain future production trends if they've overestimated.