Post-Covid tourism upturn causes havoc in Portuguese car rental market

A series of unfortunate events have combined to create another failure in the European holiday season

Local media have sounded the alarm that there is a shortage of rental cars in Portugal citing a report from the country’s industry association - ARAC. Similar to what happened with the airline industry, the country’s car rentals are finding it tough to meet demand during a rapidly rejuvenated tourism season.

The hardest-hit regions, reportedly, are the outlying and distant archipelagos of Madeira and the Azores. The reasons for the gap in the market are multi-faceted and unfortunately timed: apart from the surge in demand, there is legislation in Portugal which forces companies to not offer cars older than 5 years, plus car production chains have suffered due to the global semiconductor shortage.

The adjustment to a new reality will be bumpy

The renewal of rental companies’ car fleets has been disturbed due to a combination of factors. In response, the MPs of the regional parliament of the Azores have approved a transitional regime that will allow car rental companies to use vehicles over five years old, until December 2024.

“[With the Covid-19 pandemic] companies were forced to dispose of a large part of their fleet, seeking to minimise costs. With the current recovery and the problem of disruption of distribution and supply chains, they are finding it very difficult to replace the fleet,” the Azores Regional Secretary for Tourism, Berta Cabral, illustrated the crisis situation, as quoted by The Portugal News.

In a statement, ARAC gave more details: “Factories continue to have a lack of semiconductors for incorporation into vehicles, and there are currently thousands of produced cars parked waiting for the supply of semiconductors so that they can be delivered”.

According to the car rentals business association, manufacturers are also giving “priority to the most profitable sales channels”, which means that “the channel most affected by this situation” is vehicle rentals (rent-a-car, rent-a-cargo).

Therefore, the association appeals to manufacturers not to forget the “determining contribution of car rental companies for several years to the sector”. Still, ARAC see a note of optimism in the very fact that tourism activity is recovering and thus the incidental failures in the market can eventually be overcome.