UAE drivers rent cars rather than buy since fuel price surge

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• Fuel prices in UAE have increased more than 40% this year
• On-demand car rentals offer good value compared to taxis
• Maintenance-free weekend rentals popular with remote workers 

Rising petrol prices in the UAE are pushing small businesses and private individuals to switch from vehicle ownership to rentals, industry experts said.

UAE fuel prices have increased more than 40 percent since the beginning of this year, attributed to tightening global crude supplies after EU sanctions on oil imports from Russia, the world’s third largest oil producer, following its invasion of Ukraine in February.

The cost of petrol worldwide has hit its highest levels on record in recent months, and prices in the UAE crossed the four dirham ($1.09) mark for the first time since price deregulation in 2015. 

• Electric vehicles cost more to insure than petrol cars in the UAE

The Gulf state shifted from a system of fixed, subsidised fuel prices to adjusted monthly prices based on the average global prices, with the addition of operating costs.

Soham Shah, CEO and founder of subscription platform Selfdrive.ae, said his company has recorded growth of 30 percent month-on-month since petrol prices began surging in April. 

“In the [car] rental industry, things typically slow down in the summer,” he said. 

“Subscriptions, or micro-leases as we call them, have skyrocketed and people want to have on-demand rentals rather than committing to a purchase.”

Shah said customers who usually opt for daily or weekly rentals in the interim before buying a car have been switching to longer-term subscriptions for up to 12 months. 

“It’s not just the fuel price that has gone up, multiple factors have changed the industry at a rapid pace in the last couple of months,” he said. 

Nicholas Watson, co-founder and CEO of pay-per-minute car rental app Udrive, said his company has seen a 15 percent increase in users since the petrol price hikes.

Watson said drivers are especially enticed by Udrive’s proposition of free fuel, parking, and comprehensive insurance. 

“Customers don’t need to do anything other than driving the car,” he said. 

“Cars can be driven per minute or per day, depending on the requirement of the individual. We have great value for money. For example, from Dubai Marina to the Airport would be between 80-100 dirhams [$21.78 – $27.23] in a taxi. Normal traffic withstanding, in a Udrive car, it is approximately 32 dirhams.”

Udrive raised a $5 million funding round in 2021, which it said it plans to utilise to further enhance the data analytics capabilities of its platform, double its fleet size and expand across the Middle East, North Africa, and Turkey.

Those who do opt for taxi services are also being impacted, as Bloomberg reported on Wednesday that ride-hailing service Uber has raised its fares up to 11 percent in the UAE, as a result of rising petrol costs for drivers.

Selfdrive’s Shah added that car buyers are also putting purchase decisions on hold or reconsidering preferences due to rising automobile prices – fuelled by chip shortages at global car manufacturers.

“With fuel prices going up, in the last couple of months we’ve seen a massive shift from larger V6 and V12 engine requirements coming down to compact SUVs,” he said.

Shah added that a “micro-management” model is ideal for customers working remotely and renting a car just for meetings and weekends, without the burden of any maintenance or operating costs.

“You can save anywhere between 15 to 20 percent on mobility costs with the subscription done correctly,” he said.

Fuel efficiency of newer rental cars

“People have also realised it’s a better option to keep vehicles on demand rather than buying them because they don’t want to feel outdated. The fuel efficiency of newer cars is better, too.”

Selfdrive currently operates in the UAE, Oman, Bahrain and Qatar and is in process of expanding into Kuwait and Saudi, as well as the UK and Europe.

Udrive’s Watson added that the younger generation “follows the principle of usership rather than ownership” and has been becoming more aware of the costs and responsibilities of ownership.

“We are currently witnessing a trend of people becoming more transient by nature,” he explained. 

“Cars are one of the items you don’t need to own when travelling or living a ‘light’ asset lifestyle, therefore, making car ownership less and less appealing compared to mobility on demand. The idea of owning a car has evolved into creative leasing models, fractional ownership, and other forms of on-demand transportation.”

The number of users in the global car-sharing segment is expected to reach 60.7 million by 2026 resulting in a projected market volume of $16.52 billion, according to Statista’s 2021 Mobility Market Outlook. Some 95 percent of total revenue is expected to be generated through online sales. 

Meanwhile, despite the higher petrol costs and increasing environmental concerns, moving over to electric vehicles as rentals still has a long way to go in terms of affordability, Shah said.  

A survey by Audi Abu Dhabi published in May said that 52 percent of respondents are considering hybrid or electric vehicles as petrol prices continue to rise. 

A quarter said they are waiting for more electric vehicle options to be launched in the market to make a purchase.

“The issue with electric vehicles right now is that when you compare the size of the electric vehicle to the actual price for a month, a person might just come back and say I don’t want to pay that kind of a premium, I’d rather pay for the fuel,” he explained.

“What’s really working out though is the hybrid versions in the mid-range, where people have the option to fuel it on demand and enjoy greater fuel economy. Hybrids are currently the game changers for the Middle Eastern market.”

The global car rental market is projected to grow from 58.34 billion dollars in 2020 to 144.21 billion dollars in 2027.