Avis buys Zipcar: A match made in heaven?

The deal has plenty of upsides, though some analysts warn it's the beginning of the end for Zipcar

Zipcars in San Francisco
(Image credit: Jeremy Breningstall/ZUMA Press/Corbis)

Avis, the car-rental chain, announced on Wednesday that it was acquiring Zipcar, the car-sharing upstart, for $500 million in cash. The deal is seen as a quick and easy way for Avis to gain a good chunk of the growing car-sharing business, in which cars are usually rented out by the hour. Zipcar is mostly popular in urban areas, and its customer base of about 760,000 subscribers tends to be young. Some of the company's hip super-fans even call themselves Zipsters, according to reports.

The deal has several upsides for both companies. The car-rental industry, like the airline industry, is in the midst of a consolidation boom. Avis only recently lost a bidding war for Dollar Thrifty to rival Hertz, and Avis had to bulk up if it wanted to be a serious competitor. In addition, both Hertz and Enterprise already have hourly rental operations, which meant Avis had to play catch-up.

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Ryu Spaeth

Ryu Spaeth is deputy editor at TheWeek.com. Follow him on Twitter.