After teaming up with Ford to popularize its University Program across the U.S. colleges last August, Zipcar (NYSE:ZIP) is now collaborating with Ford, Canada, to promote car-sharing across Canadian college campuses. This is an opportunity for Ford (NYSE:F) to popularize its fuel-efficient Escape and Focus cars among young drivers and build brand loyalty. The car manufacturer is also sponsoring reduced hourly rates and membership fees. Ford is the largest automotive source for Zipcar’s University Program at more than 250 university campuses across the U.S. Zipcar is a membership-based car sharing company that serves over 673K members with a fleet of over 9K vehicles in North America and Europe.
Expansion of Zipcar-Ford University Tie-Up To Canada
Acknowledging the 18-34 years old as its most important market, Zipcar’s U.S. expansion in 2011 focused mainly on entering universities and college campuses. Zipcar provides an affordable and convenient transportation solution for college students with all-inclusive rate that covers parking, gas, insurance, maintenance and roadside assistance. From tying up with Ford to launching the Facebook app and investing in the college P2P car-sharing Wheelz, Zipcar is pulling out all the stops to become the favorite among young drivers.
After establishing partnerships with over 250 universities in the U.S., Zipcar is now expanding the program to Canada, starting with 11 campuses across Toronto and Vancouver with Ford’s Escape and Focus cars. Ford will offer a $10 discount off the $35 annual membership fee for the first 5,000 Zipcar members, who will also get $1 off the hourly rate for the first 50,000 hours of using Ford Zipcars.
Zipcar will add up to 1,700 Fords to its fleet by 2012, and the program is expected to generate 2 million hours behind the wheel of Ford vehicles for college-age drivers. By 2012, the vehicles will make up 60% of the Zipcar fleet at universities in North America. By bringing young drivers behind its wheels, Ford also hopes to build brand loyalty among the future potential car buyers.
Millennials Hold The Key To Popularity Of Car-Sharing
Millennials (18-34 years old) are strong adopters of car-sharing who weigh car-access over car-ownership, more than any other demographic. Renting cars to students also constitute a long-term marketing strategy to build the network out. Students using Zipcars while in college are more likely to subscribe to Zipcar car-sharing against car ownership when they enter jobs.
We currently estimate Zipcar Membership in North America to reach 1.9 million by the end of the Trefis forecast period. However, there could be a 20% downside to the Trefis price estimate if market growth is slower and Zipcar membership in North America manages to reach just 1.5 million by the end our forecast period. Drag the trend-line in the chart below to understand the impact of membership growth trend on Zipcar’s stock price.
We have a $22 Trefis price estimate for Zipcar, which implies a premium of 50% to the current market price.