Hertz car-share service big trouble for Zipcar?

The rental giant charges lower membership fees and offers one-way rentals.

By Trefis Jul 5, 2012 11:29AM
trefisImage: A young man admiring a new car © i love images/Cultura/Getty ImagesCar rental giant Hertz (HTZ) plans to equip its entire fleet with car-sharing-compatible Eileo technology by mid-2013. This could be a serious challenge to Zipcar (ZIP), whose current fleet of 9,000 is 30 times smaller than Hertz's 375,000 cars. 

The entry of many large players into Zipcar's niche car-sharing market has been a major worry for Zipcar's investors this year as most of the competitors offer relaxed membership fee and other benefits, like one-way rentals, to better compete with Zipcar.

Hertz On Demand gearing up with Eileo

One of Zipcar's most formidable competitors in the U.S. is car rental giant's Hertz's new On Demand car-sharing service. Hertz plans to make its entire 375,000-strong fleet compatible for online reservations and hourly rentals by 2013. Through its usual car-rental business, Hertz also has access to sufficient parking spots across the U.S. In addition, it charges much lower membership fees than Zipcar and gives its members the option of one-way rentals.


Apart from Hertz On Demand, Enterprise's WeCar and Daimler's Car2Go have recently been launching their services into new markets every month this year with distinct features and attractive pricing, threatening to chip away Zipcar dominance in the car-sharing market.


A bet on Zipcar is a bet on adoption of car sharing

While the aggressive entry by competitors threatens to steal away Zipcar's market share and slow down its membership growth, we believe the real threat to Zipcar in the long run is not competition, but the low adoption of car-sharing among urban drivers as an alternative to car ownership. According to a recent RAND report, currently just 0.27% of urban drivers have taken to car-sharing. If this number increases to 4.5%, the U.S. car sharing market could expand to 7.5 million.


Zipcar presently dominates the car-sharing market and should be able to manage at least 20% of this market, which would imply a huge upside to its current market price of $11. In fact, Hertz's aggressiveness might in fact help widen the popularity of car sharing among American drivers.


Zipcar Average Number of Members per Year for Zipcar North America

We have a $18 Trefis price estimate for Zipcar.


More from Trefis

Tags: HTZZIP
1Comment
Jul 5, 2012 3:24PM
avatar

I love the idea of companies expanding car sharing options. The more car companies that provide this, the lower the cost will be and most importantly, the increased availability of cars and locations to pick them up will likely convince more drivers that this is a viable option.

 

I searched for car sharing when I moved to Las Vegas, but could find nothing available, so I'm pleased that Hertz will be including this in their rental business.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

126
126 rated 1
286
286 rated 2
474
474 rated 3
680
680 rated 4
626
626 rated 5
609
609 rated 6
620
620 rated 7
462
462 rated 8
304
304 rated 9
132
132 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
BIDUBAIDU Inc10
BXTHE BLACKSTONE GROUP L.P10
CELGCELGENE CORP10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.