Alphabet has signed an agreement with Avis Budget Group to manage Waymo’s fleet of self-driving minivans in Phoenix, the latest in a wave of partnerships between companies seeking their footing in the market for self-driving cars.
For the past year, Alphabet has been working with Chrysler to modify Pacifica Hybrid minivans and integrate Waymo’s self-driving systems. In April, Waymo began offering free rides to Phoenix residents as part of a pilot program. Avis will service and store the minivans but will not maintain self-driving technology such as lidar sensors.
The partnership, first reported by Bloomberg, will last several years but will be non-exclusive. It could also lead to further collaboration. Avis also owns Zipcar, the on-demand car-rental service. Combining Zipcar’s rental model with self-driving technology could help Waymo develop a business model that could challenge Uber. Waymo is also collaborating with Lyft to bring self-driving cars into the mainstream.
The deal echoes in some ways Amazon’s planned purchase of Whole Foods Markets, with a tech giant reaching out to a potential rival to secure the staff and service infrastructure it can’t easily replicate itself. Self-driving car fleets are at once a threat to rental car companies like Avis and an opportunity for them to expand their role in an emerging market, albeit not as a company interacting directly with consumers but more as a backend-service provider.
Shares of Avis initially surged as much as 21 percent on the news and closed the trading session with a 14 percent gain. Even with today’s rally, Avis has declined 45 percent during the past three years, partly because of the threat that ride-sharing companies like Uber and Lyft pose to traditional car-rental companies.
Update: Avis rival Hertz Global Holdings also rose 13 percent Monday amid reports that Hertz is leasing six Lexus RH450h sports utility vehicles to Apple to use in testing its self-driving technology. While the scope of the Apple-Hertz collaboration is smaller than the Waymo-Avis partnership, it suggests companies in both industries are aligning themselves with allies to strenghten their position in the race to develop autonomous fleets.
Last month, Goldman Sachs published a research report that outlined the potential alliances that could emerge between car-rental companies and the tech industry. As the report noted,
Car rental companies are also well positioned (e.g. Avis, Hertz, and Avis-owned car sharing operation Zipcar): they have experience in financing, buying, and reselling large numbers of vehicles, and have the real estate and physical urban presence to maintain, clean, and potentially (in an electric car context) run fleets. Their current relationship with OEMs is a symbiotic one: they acquire (cheaply) cars from OEMs, thus absorbing excess inventory. Car rental companies are likely to be willing participants in autonomous fleet management joint ventures or partnerships.