Will GM Run Zipcar Off the Road?

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Proving that you can teach an old General Motors (NYSE: 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 (Nasdaq: 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 (NYSE: F  ) gave Zipcar a sweet deal to deploy at least 650 cars across 250 college campuses a few weeks ago. Hertz Global (NYSE: HTZ  ) signed an electric car rental deal with Marriott (NYSE: 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 (Nasdaq: CAR  ) and Dollar Thrifty (NYSE: DTG  ) to make some serious inroads into the future of auto rentals.

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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Ford and Zipcar. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

The Motley Fool owns shares of Zipcar, Ford Motor, and Hertz Global Holdings.
Motley Fool newsletter services have recommended buying shares of Ford Motor, Zipcar, and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 05, 2011, at 3:40 PM, Chippy55 wrote:

    What? You're telling me I should "loan" my car out during idle time, and what exactly is the purpose? It's called a taxi, or a bicycle, or a bus, or walking if you need a ride. And this zipcar has stock? They must be a bunch of pie in the sky Liberals, lol.

  • Report this Comment On October 06, 2011, at 3:53 PM, Brettze wrote:

    I see more and more new car dealers putting used cars on the lots which is a disgrace, very depressing to look at .... Anyway, I view Zipcar and the likes as alternate car dealers doing differnt ways of doing car business with different car operators that would never visit new car dealers or even used car dealers again if ever. No, they are not for well heeled car buyers who can afford to buy a new car every few years.. It is about making cars more accessbile to the masses. You can call it as public owned cars if you will. Buses may still be the cheapest way around but sometimes you prefer a quicker way to get around than standing and waitiing for the bus that comes along once a hour or comes full with slaves standing packed like sardines someitmes.. hey hey..

  • Report this Comment On October 06, 2011, at 3:58 PM, Brettze wrote:

    Also, you forget to take in account that very many people would drive very few miles annually like 1000 to 3000 miiles annually.. Why should they pay the same to own a car , pay insurance, pay registration and license, and smog check, etc.. as other people who are so addicted to driving that they go over 15,000 miles annually??? Gasoline costs are rising so much that many more people are filling up their tanks much less frequently nowadays and they are getting discomfortable with owning a car which simply burns a hole in their wallet... Usually it costs at least $3000 to operate a clunker car annually including insurance, registration, smog check , gasoline, maintenance... If you drive infrequently, you might spend less with a far better and newer car than you would ever dream of. Please no nose pickings !!

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