Zipcar Takes on Barcelona, Exercises Option on Avancar

January 11th, 2012 by Trefis Team
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Zipcar (NYSE:ZIP), the world’s leading car sharing network, has purchased a majority ownership interest in Barcelona-based car sharing company, Avancar. It also recently completed the integration of Streetcar car club in London. These will provide Zipcar a solid base for further expansion in new European markets of Spain, France, U.K. and Germany. Frost & Sullivan research estimates the European car sharing market to surpass 5.5 million members and 3 billion euros by 2016. Zipcar 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.

See our complete analysis for Zipcar.

Increases Avancar Ownership to 60%

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Avancar is Spain’s first and leading car sharing operator. Zipcar’s decision to increase its percentage ownership in Avancar to a controlling stake of 60% builds on it’s initial equity investment of $0.3 million (14% stake) in the company initiated in December 2009.

In December 2010, Zipcar loaned $0.4 million to Avancar with the option to convert the outstanding loan balance into an equity investment to a majority holding before December 2011. Avancar operates a fleet of vehicles throughout the cities of Barcelona and Sant Cugat del Valles. The transaction is expected to be completed in early 2012.

Zipcar in Europe

Barcelona is expected to emerge as a top tier car sharing market for Zipcar. With the recent conclusion of integration of Streetcar U.K. into Zipcar, the company seems to be aggressively focusing on developing its European car sharing network.

Europe has traditionally seen strong adoption of community-based and other car sharing services and the company hopes to quickly enter new markets over the next few years. Frost & Sullivan research estimates the European car sharing market to surpass 5.5 million members and 3 billion euros by 2016. Given that Zipcar plans to undertake 2 to 3 Tier-II market launches per year from 2012, we expect it to foray into new European metropolitan markets over the next few years.

Zipcar’s strategy for entering European markets includes a combination of organic growth, acquisitions, joint ventures, franchise opportunities and other relationships.

The average membership of Zipcar Europe increased from 4 thousand in 2008 to close to 70 thousand in 2010 with Streetcar acquisition. We expect its European membership to rise to exceed half million over the next decade.

We have a price estimate of $25.64 for Zipcar.