
Avis acquires car sharing company Zipcar for $500 million - prostoalex
http://thenextweb.com/insider/2013/01/02/vehicle-rental-giant-avis-acquires-car-sharing-company-zipcar-for-500-million/
======
ollysb
I'm struck by how much lower the valuation is than for the purely web based
companies. Zip car has been operating for 12 years and looks like it will be
operating for a long time to come. Even with facebook there's a question mark
around whether or not it will be operating in another 10 years.

~~~
Mvandenbergh
The main reason for that is that scaling works so differently. A purely web
based company that hits on a really good operating* model can potentially
scale whole orders of magnitude in a short period with relatively limited
additional investment.

ZipCar can't do that because their growth is constrained by the need for
expensive assets (cars). Even if they were popular enough to expand by a whole
order of magnitude over the course of a year they would require a huge
injection of additional cash from additional equity sales or lending.

As a result, it just isn't really possible for ZipCar undergo the huge upside
that a web-only company can.

~~~
ollysb
The problem is they scale down just as quickly. Currently they're sold with
valuations that speculate about the potential profits according to their level
of engagement. In many cases they'll scale down before they ever deliver on
the kinds of profits that would justify their price tag.

~~~
dasil003
True, but it will take a few more decades before the market gets as
comfortable valuing web companies as they are at valuing rental car companies.
A big part of the valuation is simply unknown upside of the web in general and
business models that will emerge. We like to laugh at the excesses of the
dotcom boom, but the uncertainties that drove the insane valuations are still
at play on a smaller scale.

------
mseebach
_"Significant revenue growth opportunities exist, including by leveraging Avis
Budget’s fleet to meet more of Zipsters’ weekend demand, which is currently
constrained by fleet availability."_

Yes! Make this work - yesterday, preferably!

~~~
philwelch
Hopefully this doesn't mean a deluge of crappy domestic cars. The thing I like
about Zipcar the most is the availability of some really nice cars, especially
the German makes.

~~~
corresation
If you had just said "crappy cars", then sure. The "crappy domestic cars" bit
was worn out a decade or so ago.

~~~
gamache
I was on travel a lot this summer, so I had a chance to rent and try many
cars. I was universally unimpressed with every American car I drove,
pleasantly surprised by every Korean car, and unsurprised by the quality of
the Japanese makes.

The domestics didn't piss me off because they were unreliable, but because
they each were designed somewhat poorly -- as an example, one featured a HUGE
miles-per-gallon readout in the center of the driver's console... and you had
to move one of your hands to see either the speedometer or the tachometer.
Crap like that, bad decisions.

So I don't think the "crappy domestic cars" bit is worn out.

EDIT: someone's gonna ask. IIRC the Americans I drove were a Ford Focus, a
Chevy Aveo, and a Ford Escape.

~~~
natrius
The Chevy Aveo is actually a Korean car. It's a rebranded Daewoo Kalos.

~~~
gamache
Huh, I didn't know that. The Aveo was the best of the "American" bunch but I
did notice a lot of slop in the clutch response when starting from rest. It'd
rev too long, then grab suddenly. Shouldn't feel that on a new vehicle, and
pedal finesse didn't seem to help.

~~~
3amOpsGuy
The Daewoo Kalos wasn't Korean, it was an American (GM) parts-bin-special.

Daewoo went to the wall, with a few projects in the drawing board, what would
become the Aveo was one of them. GM bought them out, then set to work
homogenising the assembly of the Aveo with wider GM techniques and parts.

There is undoubtedly some Korean influence remaining I'm sure, but it's
predominantly a GM car - they were quite vocal about all the improvements they
introduced.

------
anu_gupta
As a long time user of Streetcar / Zipcar, I really hope Avis doesn't fuck
with the model too much. For densely populated urban environments, the car-
sharing model is just too useful - I don't miss not owning a car in London -
no more worrying about break ins, theft, insurance, parking spaces, etc.

~~~
alexkus
Same here. I'm one of the (numerous) "founder members" of Streetcar so I pay
no annual fee to be a member, this was one of the major things that enticed me
to Streetcar in the first place. Luckily that deal stayed in place when it was
taken over by Zipcar and I'm really hoping Avis continue to honour this
agreement.

~~~
ragmondo
Me too ! I held out and held out and held out and I think they even threw in
200 quid credit into the deal too after the streetcar-> zipcar takeover. I am
a family chap and we used to be a 2 car house but that was just due to the
occasional time where the missus was using the main car for work and we
"needed" a 2nd car. I only use zipcar 10 times a year but it works well enough
for me (apart from the nearest car being 2 tube stops away). I don't think
Avis can rescind on this ??? I hope not anyway...

~~~
unreal37
Perhaps off topic, but I love all the Britishisms in this comment. So many
words Americans and Canadians don't use in there.

~~~
ZoFreX
Not off topic: Translations!

quid = pounds sterling (GBP), UK currency

chap = guy

missus = wife or partner - pronounced similar to "Mrs"

tube stop = London Underground ("the tube") station

------
samstave
I've been a zipcar user for several years. I hope they have some more
affordable rates coming up after this.

I don't have a car, and so I rely on zipcar when I do need one. The problem is
that if I need it a few times a month it's rediculous compared to the cost of
having a car.

One month I needed a car a lot, and wound up spending $850 on zipcars! That
sucked.

~~~
philwelch
Where I live, owning a car would cost $150/mo for parking, another $100/mo for
insurance, maybe $50/mo for gas, and maybe $300-400/mo for the car itself.
That's $600-700/mo TCO, and that's before maintenance and repair, and I only
get one type of car at a time rather than being able to upsize and downsize as
required. If you only go over that by $150 in one peak month, and you're
usually under it, you're getting fantastic value. For me, I break even
compared to parking and insurance alone

~~~
albedoa
_maybe $300-400/mo for the car itself._

This is true only if you ever own a car white it is under financing and it
loses its full value over the course of the loan.

Edit: unless you were simply dividing the cost of the car over the number of
months you'd be driving it and you already factored value retention into that
number, in which case either you don't need to worry about money anyway
because you are rich or there are much better ways for you to better manage
your money!

~~~
philwelch
So buy it cash, $12,000 figuring a 10 year depreciation. That's still $100/mo,
and probably a lower end car than you'll drive with Zipcar. I'm breaking even
assuming even a free car, though.

~~~
jonknee
A $12,000 car will need to be maintained and over 10 years you're likely going
to have a lot of repair costs. Zipcar builds that maintenance in.

------
uladzislau
I've being a ZipCar member for a year and this is why I cancelled my account
recently:

1) Availability There's no way you can reserve a ZipCar exactly WHEN you need
it. Most ZipCars are spread evenly between locations and in a popular ones you
can only reserve something available a few days in advance. This makes the
idea of using ZipCar useless because now you need to waste an hour of your
time commuting to a remote ZipCar location. Weekends? Forget about it. Unless
again you'd like to travel to an inconvenient remote location or book 3 days
in advance.

2) Missing/broken car - ruined plans It happened to me twice but this was
enough to make me reconsider ZipCar. Once I reserved a car for a day for a
very important trip but when I showed up at a parking location my car was
missing. ZipCar CSR on the phone refunded my order and offered drive credits
but has no idea of what was going on. Needless to say how frustrating the
whole experience was. The second time my reserved car was out of order, it
just simply wouldn't drive normally. No way I would be happy to exchange this
stress and ruined plans for 50$ in driving credits!

3) Dirty Car/low on fuel A couple of times the car I reserved was as dirty
inside/outside as it can be after days of abuse on the country roads or in the
mud races. And the only thing I could do is to report the issue to ZipCar. I
still have to use this dirty car for my business trip.

The other annoying issue has been a car low on fuel. Despite taking a car for
a couple of hours the first thing I have to do was to locate a gas station and
fuel the car.

4) Overpayment and stress First of all, advertised "starting as low as" prices
are non existent or impossible to find. They say you save money using ZipCar.
This might be true if you're using ZipCar a couple times a month for a few
hours. If you need a car for more than that you're certainly better using a
conventional rental company.

Considering that a few rental companies offer "driver pickup and dropoff"
service it makes ZipCar highly inconvenient and stressful if you think about
all above mentioned issues. I personally found myself extending reservation
hours a few times, hurring up like crazy when there was not an option to do
it. 5 or more hours using ZipCar equals in price to a 24hrs. using almost any
other car rental company.

5) Damage horror stories ZipCar damage waiver is a joke. You can buy an
extended waiver which covers only 750$ in damage. Again unlike other
conventional rental companies which would happily provide you with a full
damage waiver.

Fortunately it didn't happened to me but there's a bunch of horror stories
around when ZipCar users were asked to pay fully for the damaged car or had to
fight with ZipCar for a long time even if it wasn't their fault.

~~~
crazygringo
I couldn't agree more. I got a year's membership for free, tried it once,
never again.

For most times you want to use it (weekend), everyone else does too, so
there's never a way to "spontaneously" use a ZipCar instead of something else
(you have to reserve days in advance), and it's way more expensive than you'd
been led to believe.

But secondly, I discovered hourly-based rentals just don't work. I was the
idiot who returned my 4-hour rental an hour late, simply because of factors
outside of my control (insanely long lines where I was, too much traffic
coming back, but since I don't usually drive or go there, how was I supposed
to know?). I felt horrible for the next customer who didn't have a car, had to
pay a fine, and realized that life and traffic are just too unpredictable for
_reserved_ hourly rentals to make any sense at all.

If ZipCar had a huge fleet where everyone who wanted one in Manhattan on the
weekend could get one, that would be great... but then it would be sitting
unused during the week, and be way too expensive.

~~~
sliverstorm
_If ZipCar had a huge fleet where everyone who wanted one in Manhattan on the
weekend could get one, that would be great... but then it would be sitting
unused during the week, and be way too expensive._

This is the fundamental reason private ownership of vehicles is the mode, IMO.
Everybody tends to use them at the same time.

~~~
joe_the_user
Hmm,

One would one thing a constantly rental price could be used to balance these
demand fluctuations. ZipCar could raise prices as the weekend approached just
enough so a few cars would be left on the weekend for those willing to pay a
serious premium.

The limit might be that most users would be very annoyed at the resulting
uncertainty in how much they would pay for a car. A caveat to the efficient
market hypothesis.

~~~
sliverstorm
Right, but you can't raise them too high or else people go and buy their own
damn car, thank you very much.

------
caffeine5150
The only thing I'd predict is that Avis will screw up Zipcar in some way.
They'll raise prices or make the service worse or both. The major car rental
companies for years have been owned by major car manufacturers and, in part,
serve as backdoor dealerships. Ever wonder how the Ford Taurus was the top
selling car in America? I wonder if and how Zipcar will be modified to support
that model.

------
kokey
Potential for a lot of synergies here. Bigger fleet purchases and flexibility
to move between daily and hourly rental, giving Avis card holders access to
car sharing, the potential to cover more locations, etc.

~~~
fesja
Hopefully one day you will be able to drop a Zipcar in another garage. That
would be awesome!

~~~
michaelt
London has a bicycle sharing scheme where you can rent a bike at one station
and drop it off at another.

A side effect of this is in the mornings, when most traffic is from stations
towards the city centre, there are no bikes at stations; and in the evenings,
when most traffic is from the city centre towards the stations, there are no
free return spots near stations. To compensate for this, lorryloads of vans
shuttle back and forth in the opposite direction to the commuters.

Obviously, zipcar would follow a different demand pattern to a bike hire
scheme, but there's still a risk there'd be large scale patterns in demand -
for example in the holiday season all the zipcars might get driven to the
airport.

That isn't an insurmountable problem, of course. Presumably Avis deal with
this every day. But presumably they don't plan to turn Zipcar into Avis.

~~~
jzwinck
It feels like you're overstating the rebalancing that is done. Commuters
themselves do skew the bikes one way in the morning, but on average take them
back in the evening. People who don't live in London should not be given the
impression that there is a massive effort to reshuffle the bikes, because
there is not. It happens, but it doesn't seem overly common, much less part of
the fundamental workings of the system.

I agree with others here: desolate stations could be refilled via economic
incentives for riders.

~~~
freyfogle
I'm a heavy cycle hire user and face this problem all the time.

Solution seems straight-forward to me: if you park at an empty rack, or if you
take a bike from a full rack your trip is free (if you are casual user) or you
get small amount of credit (50p?) if you are a subscription user.

My experience with cyclehire though is they always choose the most complicated
path. As an example they way over engineer their authentication. Besides a
password you have to answer several security questions. Feels so
disproportionate.

~~~
jzwinck
Someone could start by enhancing one of the several Boris Bikes apps with a
"good samaritan" feature. Some people (like me) would find it fun to help out
by returning a bike to a slightly different station on some trips. We'd help
out for free. But as of now I don't know of any tools that encourage this.

Regarding complication of hiring Boris Bikes, note that if you want to do a
one-time (without an existing account) hire of two bikes, you need to insert
and remove your credit card 4 or 5 times, and will get two or three pieces of
paper out! The UX is just insane.

------
sethbannon
This is a disaster for ZipCar customers. There are few industries that are as
poorly run or that show as much contempt for their customers than the car
rental industry. And Avis is a big part of the problem.

~~~
nicholas73
At my first and only time renting a car, I was told that I was required by law
to buy insurance covering damages. I did not know that I might have had
insurance covering rentals elsewhere, even on credit card member benefits. I
bought it for 20 something per day, and went outside to be presented a dented
up car, whereupon I was told to not worry about dents since the car was
already beat up.

On the plus side, I was also told the car only had a quarter tank full, but
found a full tank. I didn't bother to report that, so I guess things evened
out.

------
patrickod
I'd love to use Zipcar but the under-21 filter for non-students means it's out
of reach at the moment. If I could avoid buying a car in the bay area I would

~~~
robbiet480
I was under 21 until 11/2. I got into Zipcar when I was 20. The tip is walking
up to one of their on the street tables, getting into the registration process
and then saying "Oh wait, I'm under 21!" They really want to make a sale so
they say "Don't worry, I will put you under the UC Berkeley plan". The only
restriction is you can only rent cars around the school they added you to. All
of the cars around them are nice cars but you won't be getting the Mercedes or
BMW.

~~~
patrickod
The on-campus limitation would also be a bit much for me. I'm living in
Downtown Menlo Park which means that I'd have to go onto Stanford campus to
rent a car. Think I'll just have to wait until I'm 21 :)

------
CodeCube
Good for them! I've been a fan of zipcar ever since I moved to work in NY for
a few years. Made my time in the city without a car really convenient.

~~~
kokey
I was a bit annoyed with Zipcar when they took over Streetcar, especially
since the Streetcar site and app was better than the initial integration into
Zipcar. Fortunately they seemed to have fixed most of the issues since.

------
gcv
At least in the Bay Area, that sounds like a boon for City CarShare.

~~~
chockablock
Glad someone brought up CCS. I'm a member of both, and use CCS for all my in-
city reservations--they are significantly cheaper (and provide 15-minute
reservation increments).

Zipcar I mainly use for longer trips (since CCS has a per-mile charge), moving
vans (through ZipVan), or as a backup option.

All the talk in this thread about this acquisition being an anti-competitive
move by Avis ignores the fact that Zipcar isn't the only game around in many
cities, and will continue to need to compete on price and service.

------
mixmastamyk
Always wanted to try zipcar. The only thing that scared me off was the yearly
fee, though I know that's kind of silly.

------
superuser2
Zipcar could be massively useful to college students. The 21+ age limit is a
shame.

~~~
josh2600
It's to keep liability down. The insurance pool that ZipCar benefits from
would be significantly skewed towards youth and impacting the majority of
their client base to generate more credit-risk revenue is not part of the
model.

An 18 year old is at least twice as expensive as a 40 year old business man
when it comes to car insurance.

------
rikacomet
pretty sweet deal, given it is in cash, no stocks that deflate :? for a rent-
a-car company.

