Did Car Rental Giant Avis Take a Wrong Turn Buying Zipcar ?

Cars

Zipcar, described as “…an alternative to traditional car rental…,” has been purchased by Avis, a traditional car rental provider . A bit confusing? Let’s look a little deeper.

Common Ground

The common factor between the two companies is they offer use of vehicles for a temporary amount of time. Avis provides customers rental cars at daily rates. Zipcar allows individuals to pay per hour of car usage.

The difference is the corporate company, Avis, is the profiteer in their situation, whereas Zipcar is a car sharing program in which the money makers are the individuals across the US who rent out their car.

Different Concepts, So Why The Buyout?

Some may say Zipcar caved because money talks, as Avis bought them out at just under $500 million. But it’s also no secret Zipcar has been suffering since their inception in 2000, and was indebted approximately $500 million. Not necessarily a win for Zipcar, but definitely a smart move to sell before assuming further debt.

Success and FailureAs for Avis, I think Merjerz of Seeking Alpha puts it well when saying, “Avis will, post-acquisition, be able to offer a full range of car rental services, and will have access to Zip’s loyal customers and fleet. Apparently, Avis’ expertise in fleet financing can make Zipcar a whole lot more efficient and Avis-Zipcar can better meet Zipcar’s demand than it could on its own.” Agreeably, if this proves true, the point goes to Avis for making an exceptional business decision.

My Opinion On The Future Of Avis-Zipcar

It definitely appears fewer people are purchasing cars these days, and there is demand as well as a large niche of consumers that benefit from car sharing programs. While a great concept for consumers, Zipcar just wasn’t a successful business on its own. They gave it a good run, however, and hopefully the merge of the two won’t mean a loss of Zipcar’s user and earth-friendly model.

To learn whether this is a profitable decision, stay tuned. Personally, I think car sharing is the future of transportation, and Avis is going to benefit greatly.

What are your thoughts? Have you, or would you, use a car sharing service? Please share a comment.

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