Silvercar: Redefining the Airport Rental Car Experience
Meet Silvercar, the Austin-based car rental company that is looking to shake up the $10 billion airport car rental market by leveraging technology to address the major customer complaints of traditional rental companies.
We’ve all experienced the nightmare of landing at our destination of choice only to be confronted by cramped shuttles, long lines, subpar cars and countless fees and add-ons when renting a car. Major rental companies such as Hertz, Enterprise and Avis have relied on their incumbent status and prime airport locations for far too long and have had little reason to innovate or streamline their offerings, all to the detriment of the customer. Enter Silvercar, the Austin-based car rental company that is looking to shake up the $10 billion airport car rental market by leveraging technology to address the major customer complaints of traditional rental companies.
Silvercar, which bills itself as “the world’s first hassle-free car rental company,” has done this by focusing on simplicity, consistency and transparency. They offer just one vehicle option–a silver Audi A4–priced at a flat rate per day without any hidden fees or add-ons. Every car includes GPS, SiriusXM satellite radio, in-car WiFi and gas refills that are charged at cost plus a reasonable $5 fee. Now at 11 airports, the company connects with users upon landing via their app and sends a driver to the airport for curbside pickup. After a quick stop at the nearby company office, the driver says farewell, the customer scans a QR code on the window and they’re off.
The company has successfully differentiated its offering from that of competitors by focusing on the customer experience and delivering a superior product at a comparable price. The service is especially attractive for frequent business travelers who place a premium on ease of use and access to a high-quality automobile. Their focus on technology, both in-car and integrated into their consumer app, has allowed them to more easily fulfill their customer promise while keeping overhead costs low.
As the company grows, there are obvious areas for expansion beyond their current operations. It would be easy to see them leverage their app to allow for even more immediate on-demand booking, and expanded pick-up locations beyond just airports. There are, of course, logistical hurdles to ensure there are sufficient drivers available for quick pick-ups and drop-offs as the company scales, but this is certainly not an insurmountable issue.
Since launching in 2013, Silvercar has leveraged technology to simplify the airport rental car experience and has markedly demonstrated that there are alternatives to the incumbent rental companies. If nothing else, these legacy companies will need to closely monitor Silvercar’s operations and identify best practices they can then implement into their own businesses. Because as Silvercar expands and reaches a scale where they can offer their superior rental product at an as-good or better price, there will be few reasons for customers to choose an alternative.
Interesting idea, but how defensible is this? Beyond the curbside pick-up/ drop-off (which you’ve identified as one of the bigger pain points of scaling this model), I don’t see anything that a giant like Avis or Hertz couldn’t replicate very easily. If one of these larger companies were to roll out a more user-friendly booking app that offers a “default” car rental option with all features listed above, wouldn’t they easily win the war on price, and cost through their scale?
I worked for a company called FlightCar (https://flightcar.com/) this summer which wants to tackle a lot of the problems in the car rental market through a sharing platform. They are now in 17 locations. Owners flying out park their cars for free at the airport, and the company rents them out to renters arriving to the airport. Since there is no fleet investment, they are able to offer lower rates. Relay Rides is a competitor operating primarily outside airports.
As you mention, the car rental market is very problematic. The main reason being that it is a transactional business. Similarly to airlines, companies can afford to treat customers poorly – delays, hidden fees, penalties. Renters will have similar experiences across companies and may not travel frequently enough for brand loyalty to be a decisive factor.
Because of the liabilities involved, it is difficult to truly eliminate some of the hassle involved with paperwork and complicated policies. Curbside pickup/drop-off can also be a challenge due to different airport regulations and the unit economics. Technology can certainly help to improve the customer’s experience. Having an app can allow you to check in in advance, ensure a smoother pickup experience, and familiarize yourself with the rental policies.
My primary doubt is the ability of a company like Silvercar to tackle a “quality” and “low-cost” play simultaneously, especially if it does not have the necessary scale. The industry is very competitive and to eliminate the hassles involved with car rentals you need to invest in excellent customer service. This requires an investment in technology, as well as highly-paid and motivated employees on the ground, generous reimbursement policies, and training. In pursuing this “quality” play the company would lose any cost advantage. That being said, I think there is an attractive market for a “quality” offering, but you need to build brand loyalty and a seamless, more expensive experience, for long-term customers such as business travelers.
I found Silvercar to be a very interesting start-up when I first heard of them so I enjoyed reading your post. I would certainly have used them if they were in my city this summer!
I think their model is particularly effective for business travelers. Thinking about the business consumer car rental market, it has always amazed me to see Hertz, Avis, and the others offer seemingly endless options for rent (the extremes in which business clients like to ignore, sticking with mid-size). I think for most business travel rentals, customers don’t have a strong preference on what they drive and cost (within reason) is ignored, they just want an experience that is hassle-free and quick upon landing/takeoff. They also stay loyal to a brand that delights. It seems that Silvercar alleviates these pain points and delights with a great vehicle/tech experience through the app. Renting through Avis this summer for 9 weeks I was quite disappointed by their mobile app and the distance they were from the main arrival gate. I think they need to focus on the corporate partnerships that can drive more of the right type of clients to the service to spread the excitement. Thus, building brand loyalty and keeping the right customers coming back.
I wonder how their pickup/dropoff strategy will be affected by all the regulatory issues Uber/Lyft has faced with airports. This may be alleviated if they get into carport positions similar to rental agencies (hopefully closer). Proximity may allow incumbents (Avis, Hertz, etc) to keep their advantage. The one model strategy is also something I wonder about. How much does single-model scale in this business can effectively lower maintenance costs, specifically having only the A4 versus dozens of models/brands such as the big rental companies?