Zipcar (NYSE:ZIP), the world’s leading car sharing network has teamed up with Ford (NYSE:F), making it the largest automotive source for Zipcar’s University Program at more than 250 university campuses across the U.S. The membership-based, car sharing company that serves over 605,000 members with a fleet of over 8,000 vehicles competes with traditional car-rental companies like Hertz Global Holdings (NYSE:HTZ), Avis Budget Group (NYSE:CAR) and car sharing services like Connect by Hertz, Enterprise’s WeCar, UHaul’s UCarShare and City Car Share.
We have a price estimate of $27 for Zipcar, which is about 40% ahead of the market price.
The Zipcar-Ford Alliance Focused on Young Drivers
Zipcar provides an affordable and convenient transportation solution for college students living across 250 U.S. campuses with all-inclusive rates that cover parking, gas, insurance, maintenance and roadside assistance.
The two-year strategic Zipcar-Ford alliance will introduce a new generation of drivers from university and college campuses to the highly fuel-efficient Ford Focus and Escape vehicles as well as offer incentives to join and use Zipcar car sharing services on and around campus. Zipcar will add up to 650 Fords to its fleet this year and up to 1,000 Ford vehicles by the next year.
With this new alliance with Ford, Zipcar will offer $10 off the $35 annual membership fee for the first 100,000 new University members who sign up for Zipcar, plus $1 off the hourly rate for the first 1 million hours of use on any of the new Ford vehicles at select colleges and universities. The program is expected to generate 2 million hours behind the wheel of Ford vehicles for college-age drivers. It will also provide significant fuel economy to Zipcar’s operations, helping improve its operating margin.
Aimed at Increasing Memberships in Underserved Market
University campuses not only serve as significant markets for Zipcar but renting cars to students also constitutes 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.
Zipcar is also attractive to the market segment of students who face age restrictions with traditional car rental companies. Also, since the program is expected to generate 2 million hours behind the wheel of Ford vehicles for college-age drivers, it will also help Ford popularize itself with the young university students as future potential car-buyers.