Canada Car Rentals Market Outlook to 2030

Canada Car Rentals Market Overview

• The Canada Car Rentals Market was valued at USD 2.1 billion, driven largely by domestic and international tourism growth, along with increased business travel post-pandemic. The market's recovery and expansion are attributed to factors such as the rise in demand for insurance replacement rentals and the growing adoption of electric vehicles for rental fleets. Furthermore, the shift in consumer preferences towards sustainable and eco-friendly transportation options has prompted major players to expand their offerings to include electric and hybrid vehicles.

• Several cities dominate the Canadian car rental market, including Toronto, Vancouver, and Montreal. These cities hold prominence due to their large populations, heavy influx of tourists, and significant business travel. Toronto and Vancouver serve as key transportation hubs with high levels of airport rentals, while Montreal attracts both leisure and business customers.
• In 2024, the Canadian government continued its push for green transportation by implementing stricter mandates on zero-emission vehicles (ZEVs). The government has set a target for 100% of new light-duty vehicles to be ZEVs by 2035, and rental car companies are required to comply with these targets. Rental companies benefit from tax credits and incentives to expand their fleet of ZEVs, making it easier for them to meet growing consumer demand for eco-friendly transportation options.

Canada Car Rentals Market Segmentation

By Car Type: The market can be segmented by car type into economy cars, luxury cars, SUVs, multi-utility vehicles (MUVs), and sports cars. Among these, economy cars have a dominant market share, largely due to their affordability and fuel efficiency, which attract budget-conscious travelers and business clients alike. The rising fuel prices and increasing demand for low-cost transportation options have further cemented the position of economy cars in the market.

By Application: The market is also segmented by application into business travel, leisure/tourism, and insurance replacement. Leisure travel currently holds a significant share of the market, driven by the recovery of the tourism industry post-COVID-19. Canadas diverse landscape, from national parks to metropolitan cities, attracts tourists who prefer self-drive rentals to explore the country at their own pace. Furthermore, the post-pandemic boom in domestic travel has also contributed to the rising demand for car rentals in the leisure segment.

Canada Car Rentals Market Competitive Landscape

The market is characterized by intense competition among a few key players. These companies control the majority of the market through extensive fleets, strategic partnerships, and a strong presence in major cities and airports across the country.

Canada Car Rentals Market Analysis

Market Growth Drivers

• Tourism Rebound Post-Pandemic: With Canada's travel restrictions easing, the tourism industry is seeing a strong rebound. In 2024, the Canadian government reported that over 22 million international visitors are expected, according to Tourism Canadas projections. This influx of tourists is driving demand for rental cars, particularly in key tourist destinations like Vancouver, Toronto, and Montreal.
• Growing Demand for Eco-Friendly Rental Options: The demand for eco-friendly car rental options is increasing as Canada intensifies its commitment to reducing carbon emissions, targeting a 40-45% reduction by 2030. Many rental companies, such as Enterprise Rent-A-Car, are expanding their fleet of electric and hybrid vehicles in line with the countrys goal of having all new cars be zero-emission by 2035.
• Increased Corporate Travel: The corporate travel sector in Canada is seeing a resurgence in 2024, with the Government of Canada estimating that business travel-related spending will exceed CAD 28 billion this year. Major cities like Toronto and Calgary, which host key financial hubs and major corporate events, are experiencing heightened demand for premium and business-class car rentals.

Market Challenges

• Fluctuating Fuel Prices: The rise in global oil prices in 2024, with crude oil exceeding USD 90 per barrel, has made operating costs for car rental companies in Canada more unpredictable. This price volatility has led to higher rental prices, which could discourage frequent usage, especially for long-distance rentals.
• Limited Charging Infrastructure for EVs: While demand for electric vehicles (EVs) in the car rental sector is increasing, Canadas charging infrastructure remains underdeveloped. As of 2024, there are fewer than 25,000 public charging stations across the country, which limits the ability of rental companies to expand their EV fleets.

Canada Car Rentals Market Future Outlook

The Canada car rentals industry is poised for growth over the next five years, driven by the increasing demand for eco-friendly transportation options and the growing trend of peer-to-peer car rentals.

Future Market Opportunities

• Emergence of Autonomous Vehicle Rentals: By 2028, major rental companies in Canada are anticipated to begin offering autonomous vehicles for short-term rentals. Although still in the experimental phase, the first commercial trials of self-driving rental cars are expected to start in late 2026, driven by ongoing developments in autonomous technology and regulatory support.
• Expansion of Electric Vehicle Fleets: In line with Canadas green transportation goals, rental companies will expand their electric vehicle fleets, aiming to have 60% of their vehicles be electric by 2029. Government incentives, coupled with increased demand from environmentally conscious consumers, will drive this transition.