Hertz has made agreements with the two largest ride-hailing companies, Uber and Lyft, to supply their drivers with vehicles the rental-car company rotates out of its fleet.
These partnerships mark a change in Hertz’s strategy. The car rental giant said in January that ridesharing services were crimping its growth. Like the taxi industry, car rental companies have been concerned that Uber and Lyft are taking business as from them.
“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 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. Lyft drivers have been utilizing a pilot program with Hertz since last year where they can rent a compact vehicle for $165 a week in Las Vegas and Denver, Lyft said.
“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, CEO John Tague said. Hertz rotates about 200,000 cars out of its fleet each year in the U.S., the company said.
Uber and Lyft have made agreements with automakers to bring in investment capital and expand resources available to drivers. In May, Uber and Toyota forged a deal where part of it offered customers the opportunity to lease a vehicle from Toyota and cover their payments with revenue earned as Uber drivers. In March, Lyft and General Motors announced the launch of Express Drive, a flexible, all-inclusive rental program that will give Lyft drivers access to cars at affordable rates whenever they need them.
Hertz has been making moves outside traditional car rental for a few years now. In 2013, the company announced the global launch of Hertz 24/7 to compete in the carsharing space. According to Hertz, for the first time customers will be able to rent a wide variety of vehicles near their home or work when needed and for any length of time – hourly, daily, weekly or monthly. The company estimated that by 2016, it will have “self-serve” vehicles within minutes of the majority of the U.S. population.