Waymo

Bloomberg reports today that Waymo, the self-driving car unit of Alphabet Inc., has reached an agreement for Avis Budget Group Inc. to manage its fleet of autonomous vehicles in the Phoenix area. This is potentially big news since it's the first deal of its kind between an established car rental company and a company developing self-driving vehicles.

Details are still sketchy, but the deal as outlined has Avis servicing and storing Chrysler Pacifica Minivans outfitted with self-driving hardware by Waymo, a sister company of Google under the Alphabet umbrella. Unlike a typical situation where Avis would purchase or lease vehicles directly from the manufacturer, this non-exclusive multi-year deal has Waymo retaining ownership of the vehicles and paying Avis for its service.

Can I book a self-driving vehicle from my Avis app?

No, Avis is not actually renting, or in any way offering self-driving vehicles to their customers. This is simply an arrangement in which Avis managing Waymo's vehicle self-driving fleet. It remains to be seen whether Avis will be able to eventually expand this relationship in such a way that one day allows Avis customers to actually be ferried around by a self-driving Waymo vehicle.

We certainly see an opportunity for a family arriving on a flight at Phoenix Sky Harbor Airport to summon their Avis-Waymo vehicle as they exit baggage claim. No waiting for the shuttle bus to the rental center. No standing on line at the rental center waiting for a vehicle. No meandering around the rental center lot in 110F heat (yeah it's a dry heat), trying to find your assigned vehicle. Just get in your Waymo-Avis (Wavis? Avmo?) ride and head off into the sunset.

What's in it for Avis?

Why would Avis want to do this deal? Well, it's no secret that car rental stocks have been beaten down in the past year or two on fears that both the rise of ride-sharing services like Uber and Lyft, as well as self-driving vehicles on the horizon could significantly impact the established car rental business. While this deal is probably not going to move the needle for Avis from a revenue perspective, at least for the foreseeable future, it give Avis a potential foot-in-the-door to figure out how to integrate self-driving technologies into their current business model.

What's in it for Waymo?

From Waymo's perspective, Avis has very mature fleet management capabilities which enabled Waymo to focus on what they do best, which is developing the self-driving systems, and not worry about routine maintenance like oil changes, tire rotations, vehicle cleaning, etc. It is estimated that Waymo's self-driving vehicles will be constantly on the road ferrying drivers around, adding wear and tear faster than cars parked on a rental lot for varying periods of time. It is estimated that Waymo vehicles will log around six times more miles per year than average cars.

From Waymo's perspective, Avis has very mature fleet management capabilities which enabled Waymo to focus on what they do best, which is develop the self-driving systems, and not worry about routine maintenance like oil changes, tire rotations, vehicle cleaning, etc. It is estimated that Waymo's self-driving vehicles will be constantly on the road ferrying drivers around, adding wear and tear faster than cars parked on a rental lot for varying periods of time. It is estimated that Waymo vehicles will log around six times more miles per year than average cars. Waymo also felt that ZipCar, the on-demand rental rental service with !M+ members that is owned by Avis, could potentially be a useful platform which could be leveraged in the future with self-driving vehicles.

Conclusion

You're either witnessing the very first baby steps of the established car rental industry embracing self-driving vehicles, or a desperate attempt by the rental companies to avoid the fate of the taxi industry which has clearly been negatively impacted by the rise of the likes of Uber and Lyft among others. Not only do Hertz, Avis and Enterprise have to contend with the ride-sharing industry and self-driving upstarts like Waymo, but also companies like Tesla, who have made no secret that they have plans to offer self-driving vehicles owners can put into service via the Tesla Network. Time will tell, but one thing is for certain--the future certainly won't be boring!

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