Gulf car rentals look forward to constant growth

• UAE and Saudi markets expanding
• Apps vital but offices still needed
• SUVs, EVs and hybrids all popular

Tourism, surging populations and demand for flexible transportation options are likely to spur a strong rise in demand for car rental in the Gulf region, industry experts have said. 

The car rental markets in the UAE and Saudi Arabia, in particular, are growing. 

In 2023 the industry in Saudi Arabia was valued at $2.5 billion, according to data from Research and Markets, which projected it could grow at a compound annual growth rate (CAGR) of 9 percent to reach $5.6 billion by 2032. 

The UAE’s market was valued at $2 billion last year and is projected to increase at a CAGR of 12 percent to reach $3.5 billion by 2028.

Both countries have large vehicle fleets already but may need to increase them to meet demand.

Listed Saudi car rental company Lumi operates 41 branches across Saudi Arabia, and manages a fleet of more than 35,000 vehicles. CEO Syed Azfar Shakeel said the “upward trajectory” in the car rental market is “driven by a surge in tourism, business travel, and a shift in consumer preference towards rental services for both short-term and long-term use”.

“The market is presently undergoing a transformation towards greater digitalisation with an increase in online bookings and a rise in the use of mobile apps for car rentals,” Shakeel told AGBI. 

Hassan Saduzai, CEO of on-demand car rental platform eZhire, said he was seeing “significant opportunities for continued growth and innovation within the GCC”.

eZhire, which has grown at a CAGR of 102 percent since it started in 2016, operates in the UAE, Qatar, Bahrain and Saudi Arabia, with more than 650,000 app users. 

Saduzai said there has been a “major shift towards online booking platforms and mobile applications” and this trend “not only enhances customer experience but also boosts operational efficiency across the industry”.

In terms of specific models, he said there is a growing preference for SUVs for families and long-distance travel. There is also demand for eco-friendly options, prompting rental companies to expand their electric and hybrid vehicle offerings. 

Offices still relevant

The traditional car rental industry was built around offices, but the move towards digital convenience has meant that more customers prefer to manage bookings, pickups and returns through mobile platforms. 

Soham Shah, CEO of Selfdrive Mobility, a car rental and subscription services company, said more than 70 percent of all car rental bookings in the UAE are done through an app and this figure is expected to rise as companies invest heavily in technology.

Yet Shakeel said physical offices will remain relevant, “particularly at transport hubs like airports and major travel centres, where travellers appreciate the ease of picking up and dropping off vehicles”.

• Lumi’s retail IPO tranche orders hit $333m
• UAE drivers rent cars rather than buy since fuel price surge
• Dubai Taxi partners with Bolt to take on Uber

He said the trend is moving towards fewer but more strategically located offices, with an increased online presence providing customer service. 

Saduzai said physical offices are important for handling complex transactions and accommodating those who prefer in-person service.

“The future of car rentals is evolving toward a hybrid model that blends the convenience of digital with the support of physical locations where needed,” he said. 

Ride-hailing competition 

Car rentals are increasingly competing with ride-hailing companies, particularly those that offer car-sharing rentals by the hour.

Saduzai said ride-hailing operators depend on driver availability, which can be an issue in remote areas or during peak times.

In response to the growing competition, car rental companies are “differentiating through flexible pricing, monthly and annual leasing, and personalised customer service”, said Shah. 

He said that car subscription services account for up to 25 percent of the market and are “projected to reach 30 percent to 35 percent by 2026” because they offer users a middle ground between short-term rentals and flexible car ownership.

Saduzai said in the GCC, where car ownership is less prevalent, there are opportunities for expansion.