Fans say a takeover will destroy the hip urban start-up. Others say it’s already dead
The announcement last week that Avis Budget Group is buying Zipcar for $500 million – close to double its stock market value – was a watershed moment for the upstart car-sharing industry. Zipcar, founded in 2000 on a model that bills members by the hour to use its cars, had finally been brought into the car-rental big leagues.
Avis trumpeted the deal as a perfect match. Its extensive fleet of vehicles could help fix some of the supply problems that made it hard for Zipcar members to get a car on weekends and evenings. “We expect to apply Avis Budget’s experience and efficiencies of fleet management with Zipcar’s proven, customer-friendly technology,” said Avis Budget Group CEO Ronald Nelson, in a statement.
But not everyone is convinced Zipcar will remain, well, Zipcar. Zipsters, as the company’s fans are known, are worried the hip brand, which offers Minis and sleek hatchbacks in 20 cities in North America and Europe, will put on the ill-fitting suit of an airport car-rental firm, complete with bare-bones American sedans. If its cars lose their cool, so might Zipcar members. And Zipcar can ill afford to alienate its core customers.
Despite a membership of 760,000, Zipcar has been stuck mostly in the red; it’s expected to record its first profitable year in 2012. (Its stock price has remained well below its 2011 initial public offering price of $18.) And it’s been plagued by service glitches. Benjamin Kabak, writer of the popular New York City transportation blog 2nd Ave. Sagas, has been a member for 30 months, and says service is merely “adequate.” The first car he borrowed had an expired registration, and the battery in another car died on him, he says.
Experts say Avis’s experience may be just what Zipcar needs. For a start-up, Zipcar’s logistics had became too much, says MIT business lecturer Howard Anderson. “It’s capital-intensive, labour-intensive, energy-intensive. They had very loyal customers, but it’s time to step up to more professional management.” To gain efficiencies, Zipcar will need to be remade to look a lot more like Avis. The name might survive, and profits might flow, but for fans, it would be the end of Zipcar as they know it.
This story originally appeared in Maclean’s.
