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Zipcar Says It’s Booming As Twentysomethings Reject Car Ownership

Avis, the car-rental company that bought Zipcar last year, says it will grow to 1 million members by 2015, driven by the "fundamental shift going on with regard to car ownership" among a new generation. It had around 775,000 members when purchased last March.

Posted on February 24, 2014, at 9:41 p.m. ET

The latest in the debate on whether millennials want cars or not comes from Zipcar, which said today that the generation's "fundamental shift" away from owning vehicles will help it hit 1 million members by 2015.

The car-sharing company, which Avis Budget bought for about $500 million last year, told investors that while people of all ages use Zipcar, it's "very excited about the millennial generation."

"There is a fundamental shift going on with regard to car ownership for this generation," Kaye Ceille, Zipcar's president, said. "More than half of these kids find ownership too costly — this includes the cost of the car, fuel, insurance, and parking. In addition to that, half would rather drive less, if they had other alternatives, and most of them, like our Zipsters, are actually seeking out other alternatives to car ownership."

"We are pretty set to take advantage of this opportunity," she added, citing Zipcar's "trusted brand and urban credibility and an entire generation of drivers who'd rather buy a phone than a car." The company anticipates continued double-digit percentage growth, she said.

With around 860,000 members right now, growing to 1 million would mean a 16% expansion for Zipcar this year. The service is setting up in new markets domestically and internationally, including at more airports and universities. It's also starting one-way rentals later this year and offering more flexible memberships for less-frequent users. Zipcar says it's currently available at more than 350 college campuses and in 36 major metropolitan areas; of the 165 million people in those metropolitan areas, the company says that more than half have driver's licenses and less than half own vehicles.

Car-sharing companies, which also include Car2Go and Hertz 24/7, have been booming in popularity, and may grow to more than 12 million members by 2020. Consultant AlixPartners said without such services, Americans would have purchased about 500,000 new or used cars between 2006 and the end of 2013, according to the Wall Street Journal. They're particularly popular with twentysomethings, which some interpret as a generational shift away from owning cars, though others say the group simply doesn't have the money to spend on such big-ticket items right now.

Avis, for its part, says that young people view Zipcar as a cooler brand than its namesake and Budget car-rental chains — which will be increasingly key in coming years.

"It's not your father's car rental company, which is what I think all of the major brands are today," Avis Chief Executive Officer Ronald Nelson said today. "It informs us and gives us the competitive edge in terms of how we need to morph Avis and Budget over the next five, seven, 10 years, to be able to make sure that our mother brands are as accepted to the new generation of travelers as Zipcar is."