Hertz Global Holdings, Inc. (HTZ), Avis Budget Group Inc. (CAR): How Are They Doing After the Merger?

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However, the car-sharing industry’s barriers to entry are relatively low. Zipcar’s development was initially slow and low-key: the company started by opening “pilot” car-sharing programs near major U.S. university campuses and fine-tuned its business model before rolling out its service to the general public. With the car-sharing market expected to expand by several orders of magnitude during the coming decade, it is likely that Zipcar will not be the last ride-sharing start-up to come out of the United States.

Industry Outlook and Next Moves

In fact, the automobile industry’s long-term secular challenges may provide some hidden benefits for Hertz Global Holdings, Inc. (NYSE:HTZ), Avis Budget Group Inc. (NASDAQ:CAR), and the nascent car-sharing business. Although the American rental car business is now so heavily consolidated that the FTC must subject any further deals to lengthy regulatory reviews, the concept of pay-per-use driving is still in its infancy.

While an improving economy has largely eliminated the existential threat that many major automakers faced just a few years ago, long-term guidance out of relatively North American healthy companies like Ford and General Motors has not been encouraging. Over the next five to ten years, most industry observers expect car ownership figures in the U.S. and Europe to decline in the face of rising fuel prices and changing settlement patterns. Many young, affluent American “millennials” choose to live in densely-populated neighborhoods and have little need for expensive personal vehicles.

Car-sharing and car rental services look to benefit from this trend. As such, Hertz Global Holdings, Inc. (NYSE:HTZ) appears to offer a low-risk, moderate-reward long-term investment opportunity for cautious investors. At the same time, it may not be a prime arbitrage target. After all, it is not a buyout target. Accordingly, investors with shorter time horizons may wish to look at smaller players within this space.

The article How Are They Doing After the Merger? originally appeared on Fool.com and is written by Mike Thiessen.

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