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Lyft Calls Shotgun on Car Rentals with SIXT

Can Lyft ‘reimagine’ what the traditional car rental experience looks like? This is the promise of the announced partnership between the two companies. [1] 

Last December Lyft officially entered the car rental business with its own fleet in several Californian cities. [2] Now they are doubling down on this more traditional segment of the mobility market by partnering up with SIXT, an established car rental incumbent. 

The launch of this partnership will start with Seattle, Las Vegas, and Miami – where users will be able to rent a SIXT car through the Lyft app. Lyft claims the rental experience through their app will solve the common pain points people associate with car rental services, such as long wait times at the counter, not knowing what model car you will end up with, convoluted insurance offers, and the stress of getting home from the rental location. 

Lyft plans to address these issues by providing a priority line for app users at the SIXT counter, allowing them to book the exact model of car they want, provide transparent insurance coverage options, and a $10 Lyft voucher to get home from the rental location. However, users will not get the bonus perks of renting from Lyft’s fleet – unlimited mileage, free refueling (fuel charged at market rates), and a $20 Lyft voucher for each end of the trip to and from home. 

Following this three-city launch, Lyft plans to expand to all cities within the SIXT rental network in the US in the coming months. 

 

Personal comment

When I heard about Lyft’s foray into the rental business with its fleet of cars last year, it came as a bit of a surprise to me. We have certainly gotten used to hearing about ride-hailing companies leveraging their software and consumer engagement experience to expand into other new, disruptive business areas – like e-scooters, autonomous drones, platforms for food delivery, and even long-haul freight. So getting into a traditional, physical-asset intensive business like car rental seemed to break away from this mould. However, it makes a lot more sense now in light of the partnership with SIXT. 

This partnership is pretty much the same approach that ride-hailing companies have been so successful at deploying across those other areas like food delivery and freight – take a traditional, fragmented industry, apply technology and user-experience know-how to reduce the friction in operations and make customer acquisition a breeze. In this particular deal, Lyft becomes the customer acquisition partner to SIXT, and SIXT becomes another offering in Lyft’s ever-expanding on-demand platform. The key question is whether car rentals will be more profitable than e-scooters and the food delivery business, both of which have struggled with profitability. However, car rental companies (at least Avis, Budget, and Hertz) have been reported to be struggling with profitability themselves, even before the Corona pandemic. [3]

Other interesting questions are whether this deal is an exclusive one or not? Or can Lyft make similar partnerships with the other rental companies like Hertz and Budget to bring the model back to being more of a platform? And now that Lyft has its car rental partner, will it continue to keep expanding its fleet and in-house rental program? Or perhaps that was just a real-world learning exercise all along to help it develop the expertise to get to this step. 

 

Written by Bobby Chen, RISE Mobility & Systems.

 

Sources

1. 2020-07-30. Lyft Partners with SIXT to Expand Friction-Free Car Rentals Nationwide
2. 2019-12-13. Lyft Formally Announces Daily Rental Service
3. 2019-05-07. Avis and Hertz Struggle to Find Path to Car Rental Profit