Zipcar Is Ford Tough

Rick Aristotle Munarriz, The Motley Fool
Updated

Ford (NYS: F) wants to make sure that it's just not another forgotten speed bump on the path to higher learning. The automaker is teaming up with Zipcar (NAS: ZIP) , arming the country's leading car-sharing service with at least 650 cars to be deployed across the 250 college campuses where Zipcar has a presence.

The deal makes sense for both parties. Ford will be able to introduce up-and-coming college students -- the breadwinners of tomorrow -- to its updated Focus and Escape vehicles. If the auto giant impresses the young drivers, who knows how many Ford cars it will ultimately sell.

Zipcar also comes out ahead. Terms of the deal aren't spelled out, though Ford is passing on $2 million in promotional savings to Zipcar members by slashing $10 off the annual membership fee of the next 100,000 university drivers that sign up, as well as discounting $1 off the hourly rentals for the first million hours on Ford cars.

It's sweet timing for Zipcar. The service recently lost Duke as a campus client after the university chose to go with Enterprise's fledgling WeCar service instead. Hertz Global (NYS: HTZ) turned heads last week by signing an electric car rental deal with Marriott (NYS: MAR) for its Zipcar-esque Hertz on Demand platform.

This doesn't mean there's any problematic knocking under the hood at Zipcar. The popular service in metropolitan markets and college campuses is thriving. Revenue soared 34% in its latest quarter, and adjusted EBITDA margins continue to widen. Unlike many of the more recent busted debutantes out there, Zipcar's trading higher than its IPO five months ago.

However, Zipcar's success is attracting the attention from traditional auto rental agencies that don't want to see their models disrupted by a slick upstart promising cheap hourly rentals with free gas and insurance coverage.

Hertz and Enterprise are obviously revving up in this race, and it wouldn't be a surprise if Avis Budget (NAS: CAR) and Dollar Thrifty (NYS: DTG) begin making waves.

There isn't a lot that Zipcar can do beyond keeping an eye on the rearview mirror as it floors the accelerator.

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At the time thisarticle was published

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