Vehicle recalls weigh on US rental operators’ earnings outlook: Fitch

Significant conveyance recalls successful the United States are creating near-term net and operational headwinds for car rental operators, according to Fitch Ratings.

The bureau noted that “sustained callback trends could undermine fleet modernisation strategies” designed to trim depreciation per portion and amended lawsuit satisfaction, perchance delaying borderline recovery.

The U.S. Department of Transportation reported astir 9.8 cardinal conveyance recalls successful the 3rd 4th of 2025, the highest level since aboriginal 2024.

Rental operators person been disproportionately affected owed to their reliance connected precocious manufactured vehicles. Ford accounted for astir 55% of affected units during the quarter. Fitch highlighted that accrued conveyance complexity, bundle integration issues and proviso concatenation interdependencies crossed archetypal instrumentality manufacturers are contributing factors.

Recalled vehicles typically stay retired of work for longer than modular attraction periods, placing unit connected fleet utilisation and management.

Fitch observed that “timing uncertainty astir parts availability and repair completion prevents close near-term capableness planning,” adding to operational complexity. Rental companies person constricted recourse to retrieve recall-related losses, arsenic OEMs supply repairs but bash not compensate for mislaid utilisation oregon revenue.

Operational interaction varied betwixt Hertz and Avis successful the 3rd quarter. Avis reported 5% of its Americas fleet nether recall, compared with Hertz’s 2%. Two-thirds of Avis’s recalled vehicles were awaiting parts, reducing utilisation and expanding fleet costs. Hertz achieved utilisation of 84% successful the quarter, supported by fleet tightening and process improvements, but expects recalls to proceed weighing connected operations.

Both firms person lowered guidance, citing callback uncertainty alongside different factors specified arsenic authorities shutdown impacts and strategy outages.

Fitch suggested that recall-driven proviso constraints whitethorn enactment pricing discipline, partially offsetting gross pressures. The bureau expects EBITDA margins to instrumentality to single-digit levels successful 2026, accordant with pre-pandemic performance, provided callback rates easiness and OEM proviso chains stabilise.

Liquidity remains adequate. Hertz reported $2.2 cardinal successful firm liquidity astatine the extremity of the 3rd quarter, portion Avis held $1 billion. Both are supported by conveyance borrowing capacity. Avis faces nary firm refinancing until July 2027, portion Hertz has $500 cardinal successful elder unsecured notes maturing successful December 2026, partially addressed done a $375 cardinal exchangeable notes issuance successful September 2025.