Will GM Run Zipcar Off the Road?

Rick Aristotle Munarriz, The Motley Fool
Updated

Proving that you can teach an old General Motors (NYS: GM) some new media tricks, the giant automaker is getting into the carsharing market in a surprisingly slick partnership with RelayRides.

RelayRides offers drivers the ability to share their automobiles when idle. Unlike industry leader Zipcar (NAS: ZIP) that actually owns its fleet, RelayRides is a peer-to-peer service connecting car owners with drivers.

RelayRides covers gas and insurance, offering up to 20 complimentary miles per hour.

The roadblock for RelayRides -- beyond convincing car owners that strangers won't mistreat their vehicles -- is the hassle of making a car RelayRides accessible. A one day turnaround is typically required to install the hardware that unlocks the doors and tracks the vehicle's usage. GM's OnStar can do all of that, so essentially all cars with OnStar are now RelayRides accessible without the invasive hardware.

Shares of Zipcar traded lower on the news, though there's clearly room for more players in this booming market. A study from Frost & Sullivan forecasts carsharing to have 4.4 million drivers by 2016, a substantial pop from the less than 700,000 users today.

Big names are diving into this space. Ford (NYS: F) gave Zipcar a sweet deal to deploy at least 650 cars across 250 college campuses a few weeks ago. Hertz Global (NYS: HTZ) signed an electric car rental deal with Marriott (NYS: MAR) this summer for its Hertz on Demand platform. Enterprise's Zipcar-esque WeCar is also on the move.

None of this has slowed Zipcar down. Revenue soared 34% in its latest quarter, and adjusted EBITDA margins continue to widen.

Does GM know what it's doing here, though? Encouraging its car buyers to share their cars may make OnStar-equipped vehicles more valuable, but it will also promote the carsharing movement that will reduce the number of cars -- GM or otherwise -- that are sold.

No one said this would be a straight road. Now the only real mystery is how long it will take Avis Budget (NAS: CAR) and Dollar Thrifty (NYS: DTG) to make some serious inroads into the future of auto rentals.

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At the time thisarticle was published

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