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Hertz/ICBC Auto Rental Agreement

June 17, 2012
Division:ard

The Issue:The rental agreement between ICBC and Hertz Canada has closed businesses, limited consumer choice, and cost the B.C. economy millions of dollars. In 2008, ICBC reached an agreement with Hertz Canada to provide rental cars at reduced prices to ICBC customers across the province. ICBC said the move would save the Corporation between $5.4 and $5.9 million per year[1], which would help keep insurance rates low and stable. Hertz also assured ICBC that consumers would continue to enjoy the same high level of service provided by the auto rental industry prior to the new contract. Rental companies in areas without a Hertz location could continue to service ICBC customers and bill ICBC directly, but only at the rates prescribed in the Hertz agreement.

The Impact: During the 2008 RFP process, all of the rental companies (except Hertz) concluded that they could not bid because none could service the entire province alone and the rates being suggested by ICBC were unreasonably low. Once the final rates established between ICBC and Hertz were implemented, these rental companies determined that they could not remain profitable using those same rates. Many rental car locations were forced to close their doors, since a substantial amount of their business volume was now gone.

Since the Hertz agreement went into effect in January 2009, approximately 60 auto rental locations in B.C. have closed, including an entire company chain. Approximately 300 jobs have been lost, and $20 million in business. This resulting loss of capacity has also reduced the B.C. auto rental industry’s ability to provide traditional levels of service to the B.C. tourism industry. This issue has also had an enormous impact on retail auto rental prices and consumer choice, since so many rental car locations have had to close their doors and others have had to reduce their fleet volumes and options.

In 2012, the rental industry was given another opportunity to make its intentions known with respect to bidding on ICBC related business through an Expression of Interest (EOI) process. Many rental companies made submissions, but the landscape has changed little. Preferred supplier arrangements were established (mostly re-established) and the industry as a whole continues to suffer through unreasonably low rates. Consumers continue to have limited choice and communities continue to lose valued businesses.

ARA Position: The ARA would like to help ICBC find ways to save on its alternate transportation costs without negatively affecting the auto rental industry and consumers so profoundly. The ARA supports a return to industry involvement in meeting ICBC’s auto rental needs with the goal of providing excellent service at reasonable rates. The ARA hopes to resolve these industry concerns through its newly re-established (in 2013) liaison committee with the ICBC.

For more information, please contact Darren Cox at darrencox@ara.bc.ca