Avis Buys Zipcar

Rental car giant Avis is buying Zipcar for $491.2 million. The move is the biggest deal yet in the nascent market for alternatives to traditional automotive rental systems where users might seek a set of wheels for trip of as little as an hour. Founded in 2000, Zipcar is generally seen as the leader in the car-share market and now claims 760,000 members.

The car-sharing concept has begun to revolutionize the rental business, attracting young and often affluent buyers, especially in urban areas and around college campuses. Ford Motor Co. last year announced a partnership that placed hundreds of new Ford Focus models on campuses around the country, an alliance the maker hoped would eventually convince students to buy the car once they graduated.

The challenge for many of the new competitors in the field has been to raise capital to expand, industry experts note. Zipcar has so far spread into twenty metropolitan markets in the U.S., Canada, and Europe.

The most significant difference between a car-sharing service and a traditional rental company like Avis Budget Group Inc. is in providing community-based access to vehicles that can be rented on a short-term basis, rather than by the day or week.

Several key executives, including Zipcar Chairman Scott Griffith and Chief Operating Officer Mark Norman, are expected to remain with the firm.

Zipcar went public in 2011 and in November said it anticipated ending its fiscal year with its first annual profit of $4 million. It had ended the third quarter with a fifteen percent jump in revenue, which climbed to $78 million.

Observers were not entirely surprised by the announcement, especially in light of the consolidation in the overall rental industry. Rival Hertz just last month locked down a takeover of the Dollar Thrifty Automotive Group.

NAFA Fleet Management Association
125 Village Blvd., Suite 200
Princeton, NJ 08540

Telephone: 609.720.0882 Fax: 609.452.8004