Zipcar buys UK car-sharing service

Globe Staff

Zipcar Inc., the Cambridge-based car sharing service, said it has acquired Streetcar, a British company with a similar business model, for around $50 million in Zipcar stock as Zipcar eyes new markets in Germany and France.

Britain is a "great base" for Zipcar expansion, said Zipcar chairman and chief executive Scott Griffith.

The deal combines North America's dominant car-sharing company with Britain's dominant car-sharing company, said David Zhao, a Frost & Sullivan analyst who follows the industry.

"We believe car-sharing and Zipcar will develop very fast," he said.

Before the deal, Zipcar had 400 vehicles in the UK to Streetcar's 1,400; the combined companies will operate under the Zipcar brand. Not counting Streetcar, Zipcar has 6,500 vehicles and had 2009 revenue of $130 million. Last year, Zipcar made a minority investment in a small Spanish car-sharing service to augment its presence in the UK and a dozen North American markets.

Zipcar seemingly needs to gain size as traditional rental car companies eye its space. At the end of 2008, Hertz Corp., for example, launched its Connect By Hertz car sharing service in New York, London, and Paris, a company spokeswoman said; the program has since been expanded to Berlin and Madrid and also has a small presence in Boston.  Daimler, the automotive brand, is operating a car-sharing service called car2go in Ulm, Germany, and is also testing it in Austin, Texas, with plans to make the program available in additional North American metro areas, a Daimler spokeswoman said. Griffith estimated there are 60 European companies in Zipcar's niche.

A private company, Zipcar has been the subject of speculation over whether it will soon sell stock shares to the public. Griffith declined to talk specifics about an initial public offering, or IPO.

"This is a capital-intensive business," he said. "At some point, we'll need to raise capital, and an IPO would be one option."

Zipcar has a different business model than traditional rental car companies, which typically rent by the day. Car rental companies target business travelers and vacationers and cluster much of their operations at airports.

Zipcars rent by the hour, generally for between $7 and $12. Zipcar's 360,000 members pay an annual membership fee of about $50 and reserve vehicles either over the Internet or by mobile device.

Zipcars are found on college campuses and in dense urban areas with good public transportation. Many members don't need a car every day and like the convenience of renting a car for a few hours a week without the expense of car ownership.

Griffith thinks Europeans will embrace Zipcar, partly because Europeans are more open to sharing than many Americans who have love affairs with their cars.

The Streetcar acquisition, he said, is "an important step" in Zipcar's plan to create a global car-sharing network.

(To read Zipcar's press release, please click here. The photo that appears with this post shows Zipcar chief executive Scott Griffith in the middle, flanked by Streetcar's cofounders. Andrew Valentine is on the left; Brett Akker on the right. The photo was provided by Zipcar.)