A Big-Name Deal Sends Shares of Avis Budget Group 10% Higher

It's not every day a company can sign the dotted line in a partnership with Alphabet's Waymo, but that's exactly what Avis accomplished this week -- here are the details.

Daniel Miller
Daniel Miller
Jun 26, 2017 at 12:02PM

What happened

Shares of Avis Budget Group Inc. (NASDAQ:CAR), a provider of car and truck rentals as well as car-sharing services, spiked 10% higher by 10:30 a.m. EDT Monday after the company inked a promising deal with Waymo, the self-driving car unit of Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL).

So what

Per the agreement, Avis will manage Waymo's fleet of autonomous vehicles. More specifically, Avis will service and store Waymo's Chrysler Pacifica minivans in Phoenix, which is where Alphabet is already testing ride-hailing services. The financial details of the deal are yet to be released, and may never be, but the agreement isn't exclusive. Waymo will continue to own its vehicles and simply pay Avis for its services.

It's an agreement that makes sense for both parties as Waymo inks a deal with a company that already has a network of traditional cars and customers. For Avis, adding a business partner with the clout of Alphabet is a huge win, and gives even more credibility and potential to its Zipcar business, an on-demand rental service with over 1 million members.

Now what

Driverless vehicle

Image source: Getty Images.

"It's coming our way. So it's important for us to get involved now," Avis Chief Executive Officer Larry De Shon said, according to Bloomberg. "This just demonstrates that we can extend our business into fleet-management-as-a-service."

The automotive industry seems similar to the Wild West currently: Automotive manufacturers, technology companies, parts suppliers, and various other product and service providers are competing to land strategic partnerships as the industry accelerates toward a driverless vehicle future. General Motors (NYSE:GM) already has a major investment in Lyft and has created a car-sharing service brand in Maven, which competes with Avis' Zipcar.

For investors, figuring out which partnerships will end up leading to competitive advantages will be crucial in finding winning stocks within the auto industry over the next two decades -- invest accordingly!