Home » Investment Ideas : Why Avis?

Why Avis?


Avis Budget Group [CAR]

Changes are underway in how people and goods are being transported. Ride sharing, which currently generates over $17B in revenue, is projected to grow 15% annually through 2022 to over $30B.1 Autonomous vehicles, projected to be a $77B industry by 2035,2 are also expected to play a growing role in shaping the transportation industry. Contrary to some popular assumptions, Avis is well aligned with both aspects of this rapidly evolving new economy sector and well positioned to help change the way we travel.

The Avis Budget Group (CAR) is comprised of four key brands: Avis Rent A Car, which targets corporate and leisure travelers at the high end of the market; Budget Rent A Car and Payless Car Rental, both marketed to those on a budget; and Zipcar, a car-sharing service. The company's acquisition of Zipcar in 2013 is projected to contribute to CAR's growth in the years ahead. In fact, JPMorgan research estimates this division could represent $1.2B in revenue for Avis by 2025.3 As Goldman Sachs Research states on the acquisition of Zipcar, "Avis's early entry into car sharing may position it well for the future of mobility."4

Additionally, in 2017 Avis entered into an agreement with Waymo, Alphabet's autonomous vehicle unit, to offer fleet support and maintenance services at their locations. Avis' locations near Waymo's public trials in places such as Phoenix, Arizona offer a service center and secure parking to allow riders to take advantage of their services more efficiently. According to Waymo CEO John Krafcik, "Avis Budget Group is an ideal partner to provide fleet support and maintenance."5

Figure 1: Avis Budget Group [CAR]

Market Cap ($M) $4,014
GICS Sector Industrials
GICS Industry Road & Rail

Source: Bloomberg Finance L.P., as of April 30, 2018.

Visteon Corporation [VC]

Beyond traditional auto manufacturers, a multitude of companies are poised to benefit from the rise of autonomous vehicles. One of those areas is the complex software needed to keep drivers and pedestrians safe. Visteon (VC) is a leader in this space, and its inclusion in the Smart Transportation Index highlights Kensho's ability to identify companies outside of the pure-play manufacturers that may help shape the autonomous vehicle market.

VC supplies automotive systems, modules and components to vehicle manufacturers, producing products such as climate control systems, electronics, interiors and lighting. Earlier this year, VC announced its DriveCore platform which is designed to accelerate the development and commercialization of autonomous driving technology.6 The software is expected to be ready for production in 2020 and Visteon has already announced an agreement with Guangzhou Automotive Group, a Chinese state-owned auto manufacturer,7 to help them develop autonomous technology for the vehicles they are planning to sell in the US for the first time in 2019.8

Car sales in China account for 25% of global units sold9 and the emerging economy is still seen as a high-growth market for vehicles. Additionally, autonomous vehicles are highlighted as a key sector in the Chinese government's "Made in China 2025" initiative announced in January 2018. Having already aided one of China's largest auto manufacturers through this agreement, VC is uniquely positioned to benefit from this initiative.

Figure 2: Visteon Corporation [VC]

Market Cap ($M) $3,677
GICS Sector Consumer Discretionary
GICS Industry Auto Components

Source: Bloomberg Finance L.P., as of April 30, 2018.

HAIL: View Fund Page

Other Stock Stories

  • 1 Statista, "eTravel Report 2018 - Mobility Services," February 2018.
  • 2 Boston Consulting Group, "Revolution in the Driver's Seat," April 2015.
  • 3 JP Morgan Research, "US Auto Rentals," October 18, 2017.
  • 4 Goldman Sachs Research, "Rethinking Mobility," March 23, 2017.
  • 5 Avis Corporate Website, "Avis Budget Group Enters Into Partnership With Waymo to Support Its Self-Driving Car Program," June 26, 2017.
  • 6 Visteon Corporate Website, "Visteon Introduces DriveCoreTM Autonomous Driving Platform to Accelerate Adoption of Self-Driving Technology," January 9, 2018.
  • 7 Automotive News, "Visteon to help China's GAC design self-driving vehicles," January 22, 2018.
  • 8 Forbes, "What's In Store For China's Auto Industry This Year? 2017 Provided Some Clues," February 7, 2018.
  • 9 China Daily, "Car sales hit record in 2017; 25% sold in China," January 4, 2018.

Centralized Systematic Valuation Aggregated Cash Flow (ACF) File

This information provided is calculated by Bloomberg Finance L.P., a third party not affiliated with SSGA. Neither SSGA nor its affiliates assume any liability for or guarantee the timeliness, accuracy and completeness of the information provided. The information provided is as of the date indicated and is subject to change.

This analysis or any portion thereof may not be revised or changed in any way, reprinted, sold or redistributed without the written consent of SSGA.

This cash flow table and the data contained herein (together, "Content") is provided for informational purposes only, on an "as is" basis. No source of Content, or any of its affiliates (each a "Source"), makes any warranty, express or implied, that the Content is accurate, complete or error-free, and it should not be relied upon as such. No Source guarantees the timeliness, reliability, performance, continued availability, or currency of the Content or any results obtained therefrom. No Source shall be liable for any damages, including without limitation, any special, punitive, indirect, incidental or consequential damages, or any lost profits, arising from the use of or reliance on the Content, even if advised of the possibility of such damages. Nothing in the Content shall constitute or be construed as an offering of financial instruments by any Source, or as investment advice or recommendations by such entities of an investment strategy or whether or not to "buy", "sell" or "hold" an investment.