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Wednesday, January 2, 2013

Avis Buys Zipcar: Will it Hurt the Company?

Posted by Sarah Mirk on Wed, Jan 2, 2013 at 12:44 PM

Carsharing company Zipcar broke the news today that car rental giant Avis is buying the company for $500 million.

The sale looks like it'll be investigated as a raw deal to stockholders, but if the sale goes through, it could mean big changes for Zipcar.

Carsharing is very popular in Portland, where about 15 percent of residents don't own a car. In fact, the first carsharing company in the country opened in Portland in 1998: a fleet of four Dodge Neons that founder David Brook dubbed "Carsharing Portland." That company was bought by Seattle-based Flexcar, which merged with Zipcar in 2007. In that way, Avis's acquisition of Zipcar is just the latest in a pattern of companies gobbling carsharing start-ups.

The Washington Post predicts the buy-out will spell doom for Zipcar. Writer Steven Pearlstein says, essentially, Avis's old-school corporate mindset will kill the creativity and adaptability that made Zipcar thrive. Pearlstein forsees Avis centralizing pickup points for cars, rather than having them spread conveniently all over the city; merging Zipcar's website with Avis's; and trying to annoyingly upsell customers on insurance and hotel deals.

On the other hand, change might be good for Zipcar. Their market dominance has been threatened recently by Mercedes Benz-owned Car2Go, which has a fleet of pint-size cars that, unlike Zipcars, don't have to be returned to the same spot after rental. Another company that lets people offer their own cars to share, Getaround, is also increasingly popular. With Avis' money behind it, Zipcar might be able to incorporate some of the best features of those companies or improve its own service.

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