by Tom Taulli | October 6, 2011 11:06 am
When it comes to innovation, GM (NYSE:GM) usually is one of the last companies that comes to mind. But after its near-death experience a few years ago, it looks like management is trying to engage in more creative thinking.
To this end, GM has struck an agreement with a tech startup, RelayRides, to provide for peer-to-peer car-sharing. Under the program, car owners can rent their vehicles, so long as they have an OnStar system. This onboard technology makes it easy to unlock a car with a mobile phone, as well as leverage the tracking capabilities.
This service is likely to be attractive to car owners, who can make some extra cash — average monthly earnings from car-sharing range from $200 to $300 (which sounds better than a garage sale).
RelayRides provides an online marketplace to post the availability of cars. It also conducts a background check on borrowers, and it issues a $1 million insurance policy on each car. If a driver gets into an accident, the owner’s record will not be affected.
So far, RelayRides is available only in San Francisco and Boston. But with help of GM, expansion seems imminent. The company has signed a two-year exclusive agreement that starts early next year, and there’s a possibility of a small equity investment (through the GM Ventures arm).
With RelayRides, GM should be able to showcase its wares to a younger demographic that doesn’t own a car yet but might want to in the future. General Motors also could use the service to get exposure to newer cars, such as the Chevrolet Volt.
But the deal has broader implications. It could pose a threat to other car-sharing services, especially Zipcar (NYSE:ZIP). While the company is a pioneer in the industry and even has backing from Ford (NYSE:F), it still has to pay substantial amounts for its fleet of cars. At the same time, Zipcar faces competition from traditional car rental giants like Hertz (NYSE:HTZ), Avis (NASDAQ:CAR) and Enterprise.
Caught between a nimbler car-sharing company and Big Rental, Zipcar’s growth could taper off. The stock price already has come under pressure, falling from $29.15 to $17.20 during the past six months. In light of the headwinds, the dropoff might not be over.
Tom Taulli is the author of “All About Short Selling” and “All About Commodities.” You can also find him at Twitter account @ttaulli. He does not own a position in any of the aforementioned stocks.
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