BMW introduces its first car rental service in Munich

The German luxury car-maker, Bayerische Motoren Werke (BMW) AG, has announced a new pilot project dubbed BMW on Demand, that would allow consumers to rent the company’s luxury vehicles on an hourly basis, the first project of its kind for the company.

BMW is first launching the service in Munich, Germany, the same city the company’s headquarters is located in.

When the project launches (firm date has not been announced yet), for the next 12-months during the project test period, consumers would be able to rent top vehicles from the company, including the latest X6, M3, and 7-Series sedan at a rate of about $45 USD per hour (for the 7-Series), with other less expensive BMW vehicles costing consumers less on a per hour basis.

 Drivers who want to rent a vehicle simply reserve the model they want through the Internet, or by simply calling the BMW rental station which is located beside the company’s corporate headquarters.

BMW says given on the level of success in Munich, the company could expand the service to more European cities. The company did not announce any plans to expand the project to North America or any other continents, only generally saying other European cities would be considered.

Carmakers have traditionally relied on generating revenue from direct vehicle sales and leases, but given the economic down turn, demand for luxury products, including sport cars and luxury sedans, has fallen as consumer’s disposable income has decreased coupled with growing economic volatility.

This new BMW rental service will be most welcomed by younger consumers who typically cannot afford to purchase or lease higher end luxury vehicles, giving those drivers an opportunity to drive luxury BMW vehicles at reasonable prices.

The move by BMW to offer consumers a direct luxury car rental service could cannibalize sales of other third party luxury car rental services, who’s prices are typically more expensive. The move would likely put downward pressure on those firms.

Daimler AG already offers its own car rental service, Car2go, which allows consumers to rent its luxury Mercedes Benz vehicles in Europe. The company has since expanded the service to Texas in the United States given strong adoption with its own pilot project.

In the latest fiscal quarter, Q2, the company reported net earnings of about $1.1-billion USD, up significantly from the same period last year, indicating consumers are spending more on luxury products as the economy recovers from the credit crisis.

The BMW stock (ETR:BMW) has gained about 65-percent since January, now trading at $50 per share, compared to about $30 per share at the start of the year.