German rental car magnate Erich Sixt, a powerhouse in Europe who is little known here, is pushing heavily into the United States, betting that his premium cars and luxury service can help him steal share in a crowded market. On Friday, Sixt opened a new U.S. headquarters in Fort Lauderdale, Florida, to serve as a beachhead for that expansion.
In an exclusive interview with Forbes, Sixt, 73 and the third-generation chairman of his family’s namesake business, said that he fully intended to build the company’s U.S. business to the scale of its European one. “In 10 years, we will probably have 2,000 locations in the United States,” Sixt said. “That is what I foresee. I would like to become an American company. I am not kidding.”
To get there, Sixt intends to gain market share from competitors, including the big three here – Enterprise Rent-A-Car, Hertz and Avis Budget Group – just as he stole share from competitors in the European market over the past 50 years. Based in Pullach, about 30 minutes south of Munich, Sixt is a rental car giant in Europe and its global operations span 2,200 locations in more than 110 countries. Its revenues were nearly $3 billion billion for the latest 12 months at current exchange rates.
For most Americans, however, Sixt, which was founded in 1912 by Erich Sixt’s grandfather Martin, is the biggest rental car company they’ve never heard of. The company first dipped a toe in the U.S. market in 2011, when it opened an outpost at the Miami airport. Today, Sixt said, the company has 11.8% market share there and is the third-largest rental car operator. “It’s not that the market in Miami grew,” he said. “We just took share away from competitors.”
Over the past six years, Sixt has opened car rental outposts in California, Texas, Pennsylvania, Arizona and elsewhere – a total of 55 locations across America – as it catapulted past many of the smaller players to become the fifth-largest car rental company here. Still, this is a market dominated by the big three, which have nearly 95% of the $28.4 billion U.S. car rental market by sales and 93% of it by cars in service, according to data from Auto Rental News.
Erich Sixt said that the company’s goal for 2018 is to focus on expanding into American airports, with the goal of opening 10 major airport locations by year-end. While airport concessions are tough to come by, Sixt has been able to bid on locations when they become available. Airport locations are crucial to any rental car company’s success because of their high traffic. For Sixt, they offer the additional advantage of foreign travelers who already know its brand. Sixt currently is developing an American ad campaign that it expects to roll out early next year.
Sixt has positioned itself more high-end than the typical U.S. car rental operation with fleets of Mercedes-Benzes, BMWs and other premium cars – which represent some 60% of its fleet – along with more basic automobiles. At the Miami airport, for example, a customer could choose from a Mercedes-Benz GLA ($64.08 a day), a VW Beetle convertible ($84.36 a day) or a BMW 4 Series convertible ($122.36 a day), among other options, according to a quick search of its website. The company also outfits its workers in couture-inspired orange jackets (the company’s distinctive color) instead of T-shirts with corporate logos on them. The Sixt Group's other divisions include chauffeur services and fleet management, as well as a car-sharing joint venture with BMW called DriveNow.
The U.S. moves are the brainchild of Erich Sixt, who dropped out of school to join the family business in 1969. At the time the company had just one location in Munich with 200 cars. He built it into a business with 2,200 locations worldwide and 230,000 cars. “If somebody would’ve asked me 50 years ago where I am standing today, I would’ve thought him crazy. Impossible,” Sixt said. “I started with nothing.”
The success of the company, which went public in 1986, has made the Sixt family very, very rich. The Sixts own 61.6% of the shares of publicly-traded Sixt, which has a market capitalization of $3.7 billion at current exchange rates, through the family's asset management firm, Erich Sixt Vermogensverwaltung, according to its year-end-financial statements. That values the family’s stake at about $2.3 billion. “It’s family,” Erich Sixt said of those shareholdings, “family dominated by my person.” If even half those shares were his, Erich Sixt would qualify for Forbes’ Billionaires list, but the company doesn’t break out which family members own how many shares and Sixt declined to say. His sons – the fourth generation of Sixts in the business – also work for the company, with Alexander, his older son, running organization and strategy and Konstantin in charge of sales.
“I have no interest in appearing in the Billionaires list,” Erich Sixt said. “They put me on a German billionaires list, which is not fun at all. I like to live safe and happy, you know. It doesn’t make you happier if you are a billionaire. I have no pride in having a lot of money. I am proud if the business is growing.”
In the U.S., the business is growing, and Erich Sixt argues that its strategy of offering premium vehicles at affordable prices, as well as its competitors’ weaknesses, will help it to gain market share. “I don’t want to speak bad about competitors, but I am not disappointed if you look at the results of our competitors. They are pretty poor. We made money,” he said. Avis Budget’s adjusted pre-tax income fell 27% to $304 million in the first nine months of 2017, while Hertz (whose largest investor is Carl Icahn) reported an adjusted pretax loss of $107 million in that time period, according to their financial statements. Among the industry's difficulties: Slumping used-vehicle values, weak car-rental rates and pricing challenges. Sixt, by contrast, reported that its earnings before taxes rose 30% to more than $260 million in the nine-month period ended September 30.
As for Uber, which has taken business from taxis and car rental alike, Sixt, a proudly old-school businessman, scoffs at its penchant for burning through cash. “Imagine a $2.8 billion loss. It’s not a business model. It’s stupid,” he said. “I am honestly proud that we have never lost money in 50 years. We are always profitable. That is why you are in business – not to lose money.”
Sixt does not break out revenue by country, and Erich Sixt declined to discuss revenue for the U.S. operations. He noted, however, that the company currently has some 20,000 cars in the United States out of a total corporate fleet of about 125,000, and that the U.S. market is now the second most important one in the Sixt system. The company’s revenues from outside Germany have been growing rapidly, to approximately $1.1 billion in 2016, an increase of 62% over 2014, and those foreign operations represented 40% of the group’s total revenues last year.
When he first decided to come to the U.S., Sixt said, he struggled to figure out the cultural differences and to determine which car types and models would work best in the United States. “We were making mistakes, and you are losing money automatically because you are investing in locations that are not producing money in the beginning,” he said. Now, he said, the U.S. operations are profitable, which makes the time right for rapid expansion.
What’s the potential? “Up until now, I have beaten every plan since ’69,” he said. “Every plan I have made was ready for the trash.”
