What The Avis-Zipcar Deal Means for Car Sales

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Last year, I posted a blog about how carsharing companies like Zipcar are changing the way that urban dwellers think about buying cars. Now, car sharing has grown into a booming business. In fact, carsharing companies have popped up in major cities across America and have now spread across the world. For example, Hertz, a major car rental company, has created Flexicar to serve parts of Australia and Volkswagen has introduced Quicar, which allows car sharing in parts of Germany.


Currently, in the U.S., Zipcar has seen their revenue grow by almost 18% in the past year to include over 767,000 members. All of that growth hasn't gone unnoticed. In a headline making announcement, Avis has purchased Zipcar in a $500 million deal.


Zipcar will soon become part of the Avis Budget rental line and will continue to offer hourly car rentals for their members who live in large cities. Although car sharing hasn't reached small towns and suburban areas, with the purchasing power and infrastructure that Avis Budget already has in place, that could soon change. Although Zipcar will still be run by its existing CEO, Scott Griffith, it will be able to offer additional products and services through Avis Budget.


This is good news for city dwellers who have decided that car ownership isn't for them. Instead of having to pay to insure and garage a vehicle that they rarely use, they can simply pick up a car around town and use if for an hour or two, only paying for the time they need rather than having to rent a car for the entire day. With the addition of car sharing, many people are able to postpone buying cars for years or even indefinitely.


Still, it made me wonder if this new way of getting around will have a negative impact on car sales.


At first glance, car sharing seems like something that would discourage new car ownership and hurt future auto sales. However, after looking at the problem in more depth, it's easy to see how car manufacturers and carsharing companies can actually work together.


Since the typical car sharer is someone between the ages of 21-30, who lives in the city and uses public transit, they aren't the same people who would otherwise be buying new cars. In fact, most of them would continue to use public transit, take a cab or get rides with friends if Zipcar wasn't a possibility. However, car sharing provides auto manufacturers an opportunity to market their products to a new group of customers. For example, Ford recently entered a partnership with Zipcar, to put over 1,000 new Ford Focuses on college campuses. The hope is that by allowing people to drive the car and get familiar with it, they will be more likely to look at the Ford product line when they decide to buy a car.


This sort of partnership isn't anything new. In fact, many manufacturers have similar deals with rental car companies and they don't appear to have a negative impact on overall car sales.


On the other hand, there are many who say that since car sharing reduces the number of cars on the road, car sales will have to decline. For now, it's hard to predict what will happen when car sharing makes its move into middle America. Personally, I think that car sharing provides manufacturers an amazing opportunity to reach out to customers who wouldn't typically buy cars and get feedback about the features that are the most popular among hourly renters. Just as car rental sales haven't run the car dealerships out of business, I don't think that Zipcar is going to make a difference in sales either.


Image source: Zipcar


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