Avis’ Purchase of Zipcar a Significant Move in the Changing World of Transportation

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The chang­ing land­scape of trans­porta­tion got more inter­est­ing in this new year with the announce­ment that rental car giant Avis is buy­ing the largest car shar­ing com­pany, Zip­car, for $491.2 mil­lion. Zip­car started up in 2000 and has seen slow growth in this niche indus­try where more major com­peti­tors have been enter­ing in recent years. Zip­car now has 760,000 mem­bers and com­petes with car rental majors Hertz (Hertz On Demand) and Enter­prise Hold­ings (Enter­prise Car­Share), along with a few major automak­ers; Ford Motor Co. announced a part­ner­ship last year that brought hun­dreds of Ford Focus mod­els to cam­puses around the country.

Frost & Sul­li­van Part­ner Sar­want Singh and Auto­mo­tive & Trans­porta­tion Con­sul­tant Mohamed Mubarak released an analy­sis report on the acqui­si­tion. Zip­car launched an IPO in April 2011, and it went very well. The com­pany was ini­tially val­ued at $174 mil­lion, but saw its shares surge by nearly 75% to $31 per share, bring­ing the mar­ket value, at that time, up to about $1.2 bil­lion. That cer­tainly has dropped, but Avis was will­ing to pay $12.25 per share for the com­pany, nearly 50% more than its mar­ket value on the stock exchange. Car shar­ing is a cash-intensive busi­ness – it’s not prof­itable until it reaches crit­i­cal mass, Singh and Mubarak said in their report. It’s vital to obtain exter­nal fund­ing from investors or gov­ern­ments for new pro­grams like car shar­ing to take off.

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  • Jerry L. Crenshaw

    I man­age a fleet of light duty vehi­cles (207) for the Hous­ton Air­port Sys­tem that are reserved daily via a reser­va­tion sys­tem. I am some­what famil­iar with the Zip Car soft­ware.
    What mar­ket or ser­vices will be extended to Avis cus­tomers by the pur­chase of Zip Car?