How important is car sharing to the future of personal transportation?

Enough for car rental giant Avis to spend $500 million on car sharing company Zipcar--that's how important.

The two companies have announced (via our sister site, TheCarConnection) that the Avis Budget Group has agreed to acquire Zipcar for $12,25 per share in cash, a total transaction of around $500 million.

Subject to approval by shareholders, the deal should go through in the spring.

Zipcar has grown rapidly since the company started in 2000, and now has over 760,000 members worldwide. It's the market leader in car sharing in 20 major metropolitan areas across the U.S, Canada and Europe, and also operates at over 300 college and university campuses.

While the company has posted net losses since 2000, it's also shown double-digit growth since going public two years ago. Avis expects to generate $50 to $70 million in annual "synergies" as a result of the transaction, and significant cost savings across the car fleet's life cycle.

The service for customers could improve too. Weekend demand currently outstrips vehicle availability so Avis suggests its fleet could be leveraged to Zipcar customers in times of high demand.

Concerns over the cost of running vehicles have seen car sharing user numbers explode over the past few years, customers paying a regular fee to reserve the use of vehicles when they need them, and a small fee based on how far they travel in the cars.

Most services, Zipcar included, use smartphone apps or internet sites which allow users to book a nearby vehicle. All costs--gasoline, parking, insurance--are included in the usage fees, leaving customers with none of the worries associated with running their own car--nor the environmental impact of thousands of extra vehicles on the road.

Car sharing services are also beginning to adopt electric vehices, with Zipcar rival Car2Go offering fleets of electric Smart Fortwos in several cities. With low running and maintenance costs, they provide a greener option for customers put off car ownership by rising gas prices.


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