It turns out, in the age of self-driven cars, car rental companies do have a future, albeit with a change in their business model.
The self-driving car unit of Alphabet Inc, Waymo, has disclosed that it has signed a multi-year agreement with the Avis Budget Group Inc, a car rental company, for managing its growing fleet of autonomous vehicles, which sparked a surge in Avis Budget’s shares.
The development saw Avis share price shoot up by 21% on Monday, its biggest intraday percentage gain in more than five years. They however closed at $27.67, thus registering a 14% gain.
The share prices of traditional car rental companies, including Avis and Hertz Global Holdings Inc, have taken a beating with travellers preferring to use the services of Lyft and Uber Technologies Inc.
However, the share prices of both companies are seeing better days since they have been both contacted for maintaining the self-driving car fleets of Waymo and Apple.
In an eye opener, the Waymo-Avis deal points to a potential future for car rental companies as managers of fleets of autonomous vehicles. Their services will still be required since the self-driving fleet will still need cleaning of interiors, tires changed, and vehicles secured when they are not in operation.
Apple is using the services of Hertz Global Holdings, a rival car rental company, to test its fleet of self-driving cars. The report sent Hertz’s shares shooting upwards, while Apple’s shares weren’t really affected.
Similarly, Chuck Stevens, General Motors’ CFO told analysts during a conference call that the carmaker has “done a lot of thinking” on how to manage its growing fleet of self-driving vehicles and noted that “it’s early days on how that business model may play out.”
Both Avis and Waymo have said they will launch their partnership in Phoenix, Arizona, where Waymo is allowing a select group of commuters to avail of its self-driving cars service.
Both companies have yet to clarify whether this partnership will expand to cover other cities as well. However, John Krafcik, Waymo’s head, stated in a statement that “with thousands of locations around the world, Avis Budget Group can help us bring our technology to more people, in more places.”