Europe Car Rental Market

Europe Car Rental Market Size

The car rental market in Europe is growing at a brisk pace and is expected to showcase a CAGR of 13.1% from 2025 to 2033. The size of the European car rental market was valued at USD 15.2 billion in 2024 and is anticipated to reach USD 17.19 billion in 2025 from USD 46.03 billion by 2033.

Current Scenario of The Europe Car Rental Market

The European car rental market is undergoing a transformation shaped by evolving consumer behavior, regulatory changes, and technological advancements. While tourism remains a key driver, there is a noticeable shift toward alternative rental models, such as subscription-based services and peer-to-peer car sharing. These options appeal to urban dwellers who seek temporary vehicle access without long-term ownership commitments, aligning with changing mobility preferences.

The rise of digitalization has redefined how consumers interact with rental services. AI-powered booking systems, contactless rentals, and blockchain-based security measures are enhancing user convenience and streamlining operations. Additionally, integrated mobility platforms, which combine car rentals with public transport and ride-hailing services, are gaining traction as cities push for seamless transportation networks.

Sustainability has become a central theme, with increasing government regulations accelerating the transition toward electric and low-emission fleets. Companies are not only introducing electric vehicle rentals but also investing in carbon offset programs and eco-friendly operational practices to appeal to environmentally conscious consumers.

Economic factors, including fluctuating fuel prices and supply chain disruptions, are also reshaping market dynamics. Rental firms are adapting by diversifying their fleets, securing long-term partnerships with manufacturers, and leveraging data-driven pricing strategies to maintain profitability. In this evolving landscape, adaptability and innovation are becoming critical for long-term success.

MARKET DRIVERS

Surge in Tourism and Travel

The post-pandemic rebound in tourism significantly propels the Europe car rental market. The European Travel Commission reports a 25% rise in international tourist arrivals in 2023 is fueling demand for rental cars. For instance, Spain saw a 30% increase in bookings during peak seasons, as emphasized by its Tourism Board. Government-led campaigns like Italy’s “Rediscover Italy” further amplify this trend, promoting rural exploration via rentals. Europcar has expanded fleets and introduced tourist-centric packages are howcasing how travel recovery bolsters market expansion.

Urbanization and Rising Disposable Income

Urbanization and increased disposable income are pivotal growth drivers. Eurostat data shows over 75% of Europeans live in cities, where public transport often fails to meet intercity needs. France’s National Institute of Statistics notes that 40% of Parisians rent cars for weekend trips, signaling a preference for flexibility. Higher incomes have also boosted demand, while ride-sharing apps encourage self-driven rentals, fostering market expansion through changing mobility preferences.

MARKET RESTRAINTS

High Operational Costs

Elevated operational costs hinder the Europe car rental market. The European Transport Workers’ Federation reveals a 15% surge in expenses tied to maintenance, fuel, and insurance in 2023 due to inflation and energy price hikes. Smaller operators face particular challenges; UK-based firms struggled with leasing costs, per the British Vehicle Rental Association. Larger companies absorb these costs better, but smaller players often pass them to consumers, limiting affordability. Regulatory burdens, such as emissions standards, further strain operations, impeding market growth.

Limited Fleet Electrification

Restricted adoption of electric vehicles (EVs) in rental fleets acts as another restraint. The European Automobile Manufacturers’ Association reveals only 10% of rental cars were hybrid or electric in 2023, hindered by high costs and inadequate charging infrastructure. Poland’s underdeveloped EV network exemplifies this issue, as reported by its Chamber of Automotive Industry. Consumer concerns about range anxiety also slow EV uptake, highlighting the need for investment in sustainable mobility solutions to drive progress.

MARKET OPPORTUNITIES

Adoption of Electric and Hybrid Vehicles

Sustainability trends present significant opportunities for the Europe car rental market. Hertz’s 2023 partnership with Tesla introduced Model 3 vehicles across European cities, appealing to eco-conscious customers. Tax incentives in Norway, aligned with the European Green Deal, encourage green fleet investments. Growing awareness of carbon footprints boosts demand for low-emission vehicles, positioning this segment as a critical growth driver amid shifting consumer preferences.

Expansion into Emerging Markets

Emerging markets in Eastern Europe offer untapped potential for growth. The World Bank highlights rapid urbanization in Romania and Hungary, with tourism spending rising 20% annually. Avis Budget Group capitalized on this trend in 2023 by opening branches in Budapest and Bucharest, targeting SMEs and leisure travelers seeking affordable options. This expansion taps into growing demand from both tourists and business travelers, driving revenue diversification.

MARKET CHALLENGES

Competition from Ride-Sharing Platforms

Intense competition from ride-sharing services poses a major challenge. McKinsey & Company reports that platforms like Uber and Bolt captured over 30% of urban mobility share in 2023, reducing reliance on traditional rentals. London commuters increasingly favor ride-hailing apps for short trips, limiting rental demand. Statista data shows 60% of urban millennials prefer app-based transport, pressuring rental firms to innovate and adopt digital strategies to retain market share.

Supply Chain Disruptions

Supply chain disruptions challenge the market, particularly in procuring new vehicles. The European Logistics Association attributes semiconductor shortages to geopolitical tensions, delaying fleet expansions by six months in 2023. Over 90% of EV batteries used in rental fleets are imported, as per the European Raw Materials Alliance, making supply chains vulnerable. Tariffs on Chinese imports raised production costs, hindering manufacturers’ ability to meet rising demand despite growing interest in car rentals.

REPORT COVERAGE

SEGMENTAL ANALYSIS

By Booking Type Insights

The Online booking led the Europe car rental market by holding a 65.3% share in 2024. This dominance results from rising digital adoption among tech-savvy travelers. The British Travel Association notes that over 80% of UK tourists book online for convenience and better pricing. Mobile apps have further boosted this trend. As per the European E-commerce Association, mobile bookings made up 40% of transactions in 2023, enhancing accessibility. Discounts offered by online platforms also steer consumers away from offline channels, reinforcing the segment’s leadership.

The offline booking is the fastest-growing segment, with a projected CAGR of 4.8% through 2033. Growth is driven by older demographics favoring physical locations. The German Federal Statistical Office reports that 60% of seniors prefer visiting rental offices for personalized help. Enhanced customer service innovations, like Enterprise Rent-A-Car’s multilingual staff in tourist hubs, boost user satisfaction. These trends position offline booking as a key growth driver in the coming years, appealing to underserved groups.

By Rental Length Insights

The Short-term rentals segment dominated the Europe car rental market and captured a substantial share in 2024. This is caused by their alignment with tourism, where flexibility is critical. The Spanish Tourism Board states that 80% of tourists rent cars for under a week, valuing convenience. Mobile apps now enable instant bookings and extensions, per the European Travel Commission is improving user experience. Rising awareness of last-minute deals has also fueled demand is strengthening short-term rentals’ dominance in the market.

The Long-term rentals segment is the quickest category, with a calculated CAGR of 6.5%. Growth is driven by subscription-based models popular among urban professionals. The Swedish Automobile Association reports that 50% of Stockholm residents opted for long-term rentals in 2023, citing cost savings. Innovations like Sixt’s monthly rental plan for business travelers enhance client retention. These developments highlight long-term rentals as a key growth area, meeting evolving consumer needs effectively.

By Vehicle Type Insights

The Economy cars segment prevailed in the Europe car rental market by holding a 44.1% share in 2024. Their affordability and fuel efficiency attract budget-conscious travelers. The Italian Automobile Club notes that 70% of tourists in Italy choose economy vehicles for city tours. Modern designs now offer 20% better fuel efficiency, as per the European Automobile Manufacturers’ Association, cutting costs for renters. Discounts offered by rental companies further encourage adoption, cementing economy cars’ top position in the market.

The SUVs are the fastest-growing segment and is anticipated to have a CAGR of 7.8%. The demand is fueled by families and adventure seekers seeking spacious, versatile vehicles. The French Outdoor Association reports that 60% of campers rented SUVs in 2023 for off-road travel. Innovations like Volvo’s advanced driver-assistance systems enhance user confidence. These advancements position SUVs as a key growth driver, catering to shifting consumer preferences effectively.

By Application Insights

The Leisure/tourism was the best performer in the Europe car rental market by capturing 60.2% of the share in 2024. Flexibility and convenience drive this segment. The Greek Tourism Ministry shows that 80% of tourists rent cars to explore remote islands. Mobile apps now enable instant bookings and extensions, per the European Travel Commission is boosting satisfaction. Rising awareness of last-minute deals has also increased demand is reinforcing leisure rentals’ dominance in the market.

The Business rentals segment emerged as the rapidly developing category, with a projected CAGR of 6.2%. The progress is influenced by corporate travel policies adopted by SMEs. The Dutch Chamber of Commerce notes that 50% of businesses include car rentals in travel budgets for cost-effectiveness. Innovations like Hertz’s corporate rental plan for frequent travelers enhance client retention. These trends position business rentals as a key growth driver, addressing professional mobility needs effectively.

By End-User Insights

The Self-driven rentals segment commanded the Europe car rental market and possessed a controlling share in 2024. This is associated to traveler preference for flexibility and independence. The German Travel Association found that 80% of tourists opt for self-driven rentals to explore areas at their own pace. GPS-enabled systems and mobile apps now offer real-time updates, as per the European E-commerce Association, improving navigation. Rising ride-sharing awareness also encourages personal use, reinforcing self-driven rentals’ leadership.

The Chauffeur-driven rentals are the fastest-growing segment, with a projected CAGR of 8.5% through 2033. Growth is driven by luxury demand among high-net-worth individuals and corporate clients. The French Luxury Goods Association said that 60% of executives prefer chauffeur-driven rentals for airport transfers. Innovations like Sixt’s premium service target affluent travelers seeking exclusivity. These developments position chauffeur-driven rentals as a key growth driver, catering to premium market segments effectively.

REGIONAL ANALYSIS

Germany has established itself as a leading force in the European car rental market and had a market share of 27.8% in 2024. This prominence is fueled by the country’s robust tourism industry and widespread adoption of online booking platforms. For instance, the German Travel Association reports that over 70% of international tourists renting vehicles in Germany are drawn to its scenic routes and cultural landmarks, driving demand for rental services. A major factor propelling Germany’s growth is its emphasis on sustainability. According to the Climate Neutral Mobility Initiative, German rental companies lead Europe in adopting electric and hybrid fleets, with over 15% of vehicles being eco-friendly in 2023. Additionally, government incentives for green mobility have encouraged investments in low-emission vehicles, further solidifying Germany’s position as a leader in the regional market.

Spain is experiencing remarkable growth within the car rental sector. The country’s growth is driven by its thriving tourism sector, which accounts for nearly 12% of GDP. For example, Barcelona and Madrid witnessed a 25% increase in car rental bookings during peak tourist seasons, reflecting their appeal as popular travel destinations. Another contributing factor is the rise of digital platforms. As per the European E-commerce Association, over 60% of car rentals in Spain were booked online in 2023, underscoring the shift toward digital convenience.

KEY MARKET PLAYERS

Avis Budget Group Inc., Enterprise Holdings Inc., Europcar International, The Hertz Corporation, Europcar Mobility Group, InterRent Car Rental, Peugeot Open-Europe, Localiza Rent a Car SA, SIXT SE, TOYOTA Rent a Car and Thrifty Car Rental Inc. are some of the noteworthy players in the Europe car rental market.

Top 3 Players In The Europe Car Rental Market

Enterprise Rent-A-Car

Enterprise Rent-A-Car has established itself as a dominant force in the European car rental industry, offering a broad range of vehicles and flexible rental options to cater to diverse customer needs. Its strong network of branches ensures accessibility in major cities, airports, and transport hubs, providing convenience to business and leisure travelers alike. The company emphasizes customer service, with multilingual support and localized offerings that make the rental process seamless. By focusing on personalized experiences and reliability, Enterprise maintains a strong reputation, appealing to both short-term renters and long-term corporate clients looking for efficient mobility solutions.

Hertz Global Holdings

Hertz has positioned itself as an industry leader through its focus on modernizing car rental experiences and adapting to evolving mobility trends. The company has invested in advanced fleet management, enhancing customer convenience through digital booking platforms and contactless rental services. Its emphasis on sustainability aligns with the growing demand for environmentally responsible transportation, with efforts to integrate more fuel-efficient and alternative energy vehicles into its fleet. By continuously improving its service offerings and streamlining operations, Hertz strengthens its presence across Europe, catering to travelers who seek a seamless, technology-driven rental experience.

Avis Budget Group

Avis Budget Group distinguishes itself through a combination of brand strength, operational efficiency, and tailored services for different customer segments. The company provides flexible rental plans suited for corporate clients, small businesses, and individuals, ensuring a wide appeal across the market. With a commitment to enhancing customer experience, Avis Budget leverages digital solutions to optimize vehicle availability, streamline booking processes, and improve service accessibility. By prioritizing convenience, reliability, and innovation, the company remains a key player in shaping the evolving landscape of car rentals across Europe.

Top Strategies Used By Key Players

Expansion Through Mobility Solutions - Enterprise Rent-A-Car

Enterprise is not just a traditional car rental company; it has evolved into a broader mobility solutions provider. Instead of solely focusing on short-term rentals, the company has strategically invested in long-term leasing, car-sharing, and subscription-based models. This diversification allows Enterprise to appeal to a wider audience, including businesses seeking cost-effective fleet solutions and urban dwellers looking for flexible alternatives to car ownership. Additionally, its strong emphasis on customer loyalty programs strengthens retention, ensuring repeat business from frequent travelers.

Adaptation to Changing Consumer Habits - Hertz Global Holdings

Hertz has recognized the shift in consumer behavior, where many travelers now prioritize convenience over traditional rental structures. To cater to this demand, the company has embraced a more app-driven rental experience, eliminating the need for in-person transactions. With seamless pick-up and drop-off processes, self-service kiosks, and AI-driven pricing models, Hertz is redefining the way consumers engage with rental services. Furthermore, its emphasis on premium vehicle offerings, including electric and luxury cars, attracts high-end clientele looking for both sustainability and sophistication in their rental experience.

Technology-Driven Efficiency and Cost Optimization - Avis Budget Group

Avis Budget Group has positioned itself as an innovator in operational efficiency, utilizing data analytics to optimize vehicle utilization and fleet management. By leveraging predictive maintenance technologies, the company reduces downtime, ensuring its fleet remains in top condition and readily available for customers. Additionally, Avis Budget has embraced AI-powered customer service solutions, streamlining interactions through chatbots and automated support systems. This tech-forward approach allows Avis Budget to reduce overhead costs while maintaining a high standard of service, ultimately improving profitability and enhancing the overall rental experience.

Competition Overview In This Market

The competitive landscape of the European car rental market is evolving beyond traditional dominance by established players. While Enterprise, Hertz, and Avis Budget Group continue to lead, their competitive strategies are being challenged by new entrants and evolving consumer expectations. The increasing role of mobility-as-a-service (MaaS) solutions has intensified competition, with companies expanding into car-sharing, ride-hailing, and subscription-based rentals to retain market relevance.

Local and regional companies are gaining prominence by focusing on hyper-personalized services, such as tailored rental experiences for business travelers or long-term leasing for expatriates and students. Additionally, collaborations with airlines, travel agencies, and corporate partners allow smaller firms to secure a loyal customer base without large-scale operations.

The shift toward sustainable travel has further altered competitive dynamics. Companies prioritizing eco-friendly fleets, electric vehicle (EV) integration, and carbon-neutral initiatives are capturing environmentally conscious consumers. Meanwhile, digital transformation plays a crucial role, with AI-driven pricing models, contactless rentals, and blockchain-based identity verification streamlining operations.

Ultimately, while major players benefit from brand recognition and economies of scale, the market is increasingly fragmented due to disruptive business models and shifting consumer preferences. Companies that embrace technological adaptability, sustainability, and localized offerings are best positioned to thrive in this evolving landscape

RECENT HAPPENINGS IN THIS MARKET 

• In January 2024, Hertz launched a fleet of 10,000 Tesla Model 3 vehicles across European cities. This initiative aimed to attract environmentally conscious customers and align with sustainability goals.
• In March 2024, Enterprise Rent-A-Car partnered with the Italian Tourism Board. This collaboration aimed to promote road trips in rural areas and boost rental bookings during off-peak seasons.
• In May 2024, Avis Budget Group acquired a Czech car rental firm. This acquisition was intended to expand its operations in Eastern Europe and enhance local market penetration.
• In July 2024, Sixt introduced a premium chauffeur-driven service in Paris. This launch aimed to cater to high-net-worth individuals seeking exclusive travel experiences.
• In September 2024, Europcar unveiled an AI-driven booking platform. This initiative aimed to streamline the reservation process and improve customer satisfaction through real-time updates.

MARKET SEGMENTATIONS

This research report on the European car rental market has been segmented and sub-segmented into the following categories.

By Booking Type

• Online Booking
• Offline Booking

By Rental Length

• Short-Term Rentals
• Long-Term Rentals

By Vehicle Type

• Economy Cars
• SUVs
• MUVs
• Luxury Cars

By Application

• Leisure/Tourism
• Business
• Others

By End-User

• Self-Driven
• Chauffeur-Driven

By Country

• UK
• Russia
• Germany
• Italy
• France
• Spain
• Sweden 
• Denmark
• Poland
• Switzerland
• Netherlands
• Rest of Europe