Here's An Idea For United Auto Group Smart Line Distributorship: Car Rentals

| About: Penske Automotive (PAG)

Here’s a new idea for United Auto Group (NYSEARCA:UAG) to approach their distributorship with the Smart line. . . car rentals/sharing. As you are probably aware, United Auto Group has been awarded the master franchise agreement from Daimler to oversee all of the smart dealerships in the United States. Roger Penske, United Auto Group’s Chairman, stated in an interview with MarketWatch yesterday morning:

I think today with fuel efficiency being key on people's minds, [and] certainly urban congestion, a unique vehicle like this will give us a chance to show the marketplace a new alternative [form of] transportation.

Now one of the BIG concepts I am always discussing is convergence. The vendors and customers of today are likely going to converge into being your biggest competitor ten to twenty years down the road. Microsoft (NASDAQ:MSFT) was a software vendor to the tech leader IBM (NYSE:IBM), and then Microsoft’s operating system commoditized the box and Microsoft became the tech leader (IBM doesn’t even make computers anymore, they consult). Google (NASDAQ:GOOG) is a customer to Microsoft, but now they are working on a way for you to access software products via the web so you won’t even need an operating system (just a box that takes you to the web).

Car rental companies today are fleet customers to the automakers and auto retailers. But ten to twenty years from now, at least in metro markets, I think they may be the biggest competitors to car dealers. Remember how I have written about the Zipcar? Just in case you’ve forgotten, I basically said that in February 2005, Wireless Week ran a story talking about how Zipcars has 30,000 members in 21 cities, in seven states with rental rates between $8.50 an hour to $60 a day.

The concept is for people in major metropolitan markets that may not want to own a vehicle (with high insurance, parking and repairs from all the dings of parallel parking) to be able to use a car whenever they want. Wireless Week says:

Members reserve a Zipcar online and then just walk to the assigned car, which could be in a parking lot, garage or an assigned parking spot on the street. Waving the Zipcard near the driver's door unlocks the door and allows the car's keys to operate the ignition. The Zipcard only works after the car has received the authorization via GPRS.

According the article, 39% of the members either have sold their cars or stopped planned purchases of vehicles, and the company “sees its main competition as private car ownership.”

So here’s an idea. The Penske Corp (which owns the majority of United Auto Group) is incredibly familiar with running efficient “vehicle rental or leasing” type companies, because one of the company’s in their portfolio (in a joint venture with GE) is Penske Leasing (basically moving trucks). And the Smart vehicle seems ideally suited for metro markets. So it seems to be that as an additional feature to the franchises, why doesn’t UAG use the Smart dealerships to offer a similar rental/car sharing service like what Zipcar offers? Just a thought.