Zipcar Raises Prices in D.C. Despite Increasing Competition

ZIP: Zipcar logo

Zipcar (NYSE:ZIP) has raised its prices in Washington D.C., one of its biggest markets. The car sharing company has hiked its prices despite new competitors such as Hertz’s (NYSE:HTZ) On Demand and Daimler’s Car2Go coming up in the D.C. market, that are challenging Zipcar’s monopoly with its flexible membership terms and one-way rental facilities. Zipcar has over 673,000 members who use approximately 9,000 of its vehicles.

See our complete analysis for Zipcar’s stock.

With the price revision, the standard hourly rental rates for Zipcar in D.C. are expected to go up by 1.5% to 2.5%, depending on the car rented. This means that the hourly charge would now range from $8 to $12. Hertz On Demand and Car2go’s entry into the market became imminent after Hertz, Daimler, and Enterprise (NYSE:EPD) made serious bids for parking spots in the city last year. As a result, Zipcar lost access to 80% of its reserved parking spaces in the city.

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New competition to turn on the heat

Zipcar needs to seriously watch out for these new competitors who are challenging its market share and growth with their distinct offerings and attractive pricing, as well as trying to match up to Zipcar’s technology. While Car2go offers one-time membership fee of $35 and rentals by minute, compared to $60 annual membership fee and hourly rentals by Zipcar, Hertz On Demand goes one step further doing away with membership fee altogether. Thanks to its usual car-rental business, Hertz also has access to the best parking spots across the U.S. and has a fleet size of 375K, around 30 times that of Zipcar. It also plans to fit its entire fleet with the car-sharing compatible Eileo technology by 2013, which could be a serious threat to Zipcar’s growth over coming years.

We have a price estimate of $22 for Zipcar, about 50% ahead of the market price.