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Warning to the Car Rental Industry

Startups like Uber decimated taxi companies. Is the Car Rental industry next?

For Father’s Day this year, Brett Porter is hoping for a Ferrari.

Not to own—though that would be nice—but to drive around for a day. Last year, his kids celebrated by renting him a silver 2009 Mercedes Benz SL63. They picked it up near his home in Redondo Beach, California, then drove to the Concours d’Elegance, an annual automobile exhibition in Beverly Hills that attracts folks in Lamborghinis. Porter’s wife and two sons arranged the day through Turo, a San Francisco-based startup that lets private car owners rent out their vehicles, for about $250.

“It was a fun day, for sure,” Porter, 57, said. “I’m expecting it for my Father’s Day every year now. I’m going to give them a hard time when I don’t see a Ferrari in my driveway.”

Porter could get his wish—there are several Ferraris available for rent on Turo in greater Los Angeles—unless Enterprise Rent-A-Car has something to say about it. Enterprise has backed legislation in at least half a dozen US states that would define the new “car-sharing” startups as rental car companies and subject them to a long list of rules and regulations, a campaign that Turo says could put it out of business.

No company is better poised to quash Turo than Enterprise, which is every bit the Goliath to Turo’s David. Enterprise has been America’s biggest car rental company since 1996, consolidating the industry with its 2007 purchase of brands National and Alamo. Enterprise Holdings Inc., the parent of Enterprise Rent-A-Car, did $22 billion in revenue last year, has a fleet of nearly 2 million cars and trucks, and commands 38% of the rental business at US airports. In 2017, Enterprise spent $880,000 on federal lobbying, according to data from the Center for Responsive Politics, more than rival rental firms Hertz and Avis spent combined.

Turo, founded in 2009, has raised $216 million from investors including German automaker Daimler and global insurer Liberty Mutual. It typically takes a 20% cut from people renting out their cars, and provides insurance for owners and renters through Liberty Mutual. As of April, Turo said it had 230,000 vehicles listed on its platform in four countries, and it recently partnered with boutique rental car companies on a major international expansion.

Enterprise quietly became the largest US rental company using cheap offices, an army of young, energetic employees, and chummy relationships with people in the auto industry. The company understood that recommendations from mechanics and service managers were extremely valuable, and it would have pizza and doughnuts delivered to garages to keep those workers happy. Enterprise aimed to be not just an airport car rental operation but the go-to spare car for American families.