Now that the summer has arrived in Europe, it’s time to think about car hire. This is a subject of anxiety and controversy for many. Electric cars are making things worse. The industry has been affected both by Covid and problems in the car industry itself. Covid reduced tourism and thus demand for transport. But Covid increased fears about trains and planes, so the share of car hire increased. At the start of Covid, car hire companies did not renew their fleets, and when they finally went to do so, cars were not available, due to shortages of the electronic chips that are now key components of modern cars. This led to reduced availability and higher rental charges.
These compound the traditional anxieties anyway faced by consumers in renting a car. In the EU, taking a hired car across national boundaries requires specific permission of the hire car company. And extra fees, perhaps. So much for the Single Market. But a big consumer concern is that of insurance cover, and liability for damage. You have to sign a form saying that you have inspected the car when you take it over. Existing damage will be marked on it. But have all the scratches been identified? It’s late, you’re tired, and the guy from the company is impatient….
Car rental is one of the top areas of consumer rights complaints in the European Union, especially in relation to damage charges, insurance coverage, and fuel policies. In Europe, the major car hire companies have a dispute resolution service, ESRCS. In 2022, damage was the biggest reason for disputes handled, at 37 per cent of the total. Maybe AI can help? There could be an automatic scan of the car with an identification of any deviations from the correct surface area, before and after the rental. All the better if it was to an agreed international technical standard, so that disputes would be kept to a minimum. And potential fraud also eliminated.
But in a way this would be missing the point. Car hire companies charge users for any scratches on the car. The charges are notionally the cost of repair. But the car companies do not repair, as long as the car can still be rented out. They simply pass on the car to the next customer at the same price and make no reduction. Hence there is no loss to them. The new customer receives notification from the company that so many existing scratches on the car are in place. But he receives no notification of a reduction in price as a consequence. The car companies do not make the corrections to the car for which they have charged the previous customer. They keep accumulating scratches or sell the scratched car at the end of its life, in which case the loss to them is the difference between the selling price of a scratched and unscratched car. This is the real loss to the company. It ought to be spread over all the customers who have caused the scratches, rather than saddling each of them with high charges for the scratches each have made. It could also be that the car hire company waits until there are enough scratches and gets them all repaired at the same time. This will surely be cheaper than the individual repairs.
Maybe a new model is needed. Car sharing is increasing. Uber has a new initiative.
The news that Philip Morris International, the cigarette people, was trying to buy Vectura, a company that makes equipment to relive sufferers with asthma, COPD and so on, aroused some controversy: “If PMI were to acquire Vectura, PMI could then profit from treating the very illnesses that its products cause.” The sale has now been finalised.
Well, it’s a matter of recognising the linkages at the consumer level. It’s an approach that has already been taken by the makers of a herbicide, who also sold the seeds for crops that were resistant to it. So if you used it to get rid of your weeds, you would also kill your crop, unless it had been grown with the seeds from the same people. And they didn’t miss a trick: they patented those pesticide-resistant seeds. If you bought those seeds, it was with the condition that you were not to use any of the crop as seed for next year: you had to buy new seeds. It was a way of doubling up on the investment.
One man’s conflict of interest is another man’s synergy. The concepts of vertical integration and horizontal integration are well known, but the type of strategy we’re talking about breaks new ground. It catches out the consumer at every stage while ensuring that every stage occurs. We could call it life-cycle integration.
Apparently Philip Morris plan to have more than half their revenues arising from no-tobacco activity. Perhaps they’re going to make another logical investment. The prospects look good for the funeral industry.