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Hertz Global Holdings Inc. reached agreements with Uber Technologies Inc. and Lyft Inc., the two largest U.S. ride-hailing startups, to supply drivers with vehicles the rental-car company rotates out of its fleet.
The partnerships, announced in statements Thursday, may mark a reversal for Hertz, which said in January that ride-sharing services were crimping growth. Uber and Lyft have been seen as a threat to auto-rental companies as travelers opt for an on-demand ride as opposed to driving a rented vehicle.
“Largely, Uber is a technology company, so if you think about who can provide fleet management services I think the list is rather short” and includes Hertz as well as Avis Budget Group Inc. and Enterprise Holdings Inc., said Northcoast Research analyst John Healy. Hertz, which he rates as a buy, is “already on the fringes of this business” and it could be a big market for the company, he said.
Mid-sized cars for Lyft and Uber drivers will rent for $180 a week, including all mileage and insurance costs, said Hertz spokesman Bill Masterson. A Lyft representative said the company’s drivers get a compact vehicle for $165 a week in Las Vegas and Denver, where it has had a pilot program with Hertz since last year.
“We believe renting to ride-sharing drivers will be more profitable than selling these vehicles, but that’s something that we’re going to learn in the first year of this supply agreement,” Masterson said in a phone interview.
The vehicles Hertz will supply to Uber and Lyft are well-maintained and in good condition, Chief Executive Officer John Tague said. Hertz rotates about 200,000 cars out of its fleet each year in the U.S., Masterson said.
“We consider this agreement to be largely complementary to our car-rental business, and it enables us to leverage our fleet and distribution infrastructure to participate in the dramatic growth in the ride sharing, or e–hailing, segment,” Tague said in a statement.
Hertz rose 2.9 percent to $11.08 at 3:29 p.m. New York time. The shares fell 24 percent this year through Wednesday as an oversupply of vehicles pressured rental pricing.
Uber, recently valued at almost $68 billion, and the smaller Lyft, last valued at $5.5 billion, have been competing for business with driver promotions and subsidized fares. While Lyft operates only in the U.S., it has teamed up with China’s Didi Chuxing and other global ride-hailing companies to form alliances to take on Uber, which pledged to spend at least $1 billion a year to challenge Didi in China. Demand for ride-hailing remains high in the U.S., with Lyft posting a record month for rides in May.
The Hertz-Lyft deal builds on their pilot program, with an expansion to Los Angeles and San Francisco and more markets expected to follow, the rental-car company said. Participating Uber drivers will start in the Los Angeles area. Hertz will provide set rates for drivers, whose vehicles will be serviced from dedicated off-airport locations, according to a statement. Drivers can use the vehicles for personal driving in addition to business purposes, the Estero, Florida-based rental company said.
“We’re thrilled to be partnering with Hertz to offer a new rental option,” Uber said in an e-mailed statement, citing discounts from automakers and flexible vehicle financing as other ways the company assists its drivers. “These options expand drivers’ choices and have helped drivers save over $20 million in car purchases across the globe.”
Lyft said its partnerships are designed “to bring drivers the best possible programs,” and include other efforts such as Express Pay, which provides same-day payments to their existing bank accounts.
The announcements come amid a flurry of partnerships between automakers and ride-sharing services as demand grows for quick-access vehicles. General Motors Co. took a stake in Lyft and they have said they aim to develop a fleet of self-driving taxis. Fiat Chrysler Automobiles NV, which is supplying minivans to Google’s self-driving car program, has started discussions with Uber on a potential partnership on driverless cars, people familiar with the matter said earlier this month.
“It’s a huge unknown how big this business can be,” said Healy, the Northcoast analyst. ‘It’s a huge unknown how the relationship with Uber and Lyft and Hertz and potentially other rental-car companies and other ride-hailing companies will evolve. I think it signifies that these companies aren’t staying stagnant and going to allow themselves to go the way of a buggy whip.”
(Updates with rental pricing and company comments starting in fourth paragraph.)
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©2016 Bloomberg L.P.
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