Old-school rental-car agencies may have a road map to prosper in the age of self-driving taxis after all.
Avis Budget Group Inc. agreed to manage a fleet of 600 self-driving Chrysler minivans for Alphabet Inc.'s Waymo autonomous technology division. In addition, Hertz Global Holdings Inc. will lease Lexus crossovers to Apple Inc., which will convert them to self-driving vehicles, said people familiar with the matter Monday.
Those deals, while small in scope, comforted investors enough to push up shares of both companies by 14 percent, a remarkable one-day showing for an industry whose stocks have long been out of favor.
The reason for the optimism: Calling on the likes of Avis and Hertz shows that Apple and Waymo are willing to partner with traditional players instead of driving them into oblivion. The big technology companies may want into the self-driving vehicle business, but they don't necessarily want to build, own or shine the metal.
"Some people thought that they would be victims, but they're the only companies that can handle fleets on a large scale," Michael Millman, founder of Millman Research in Short Hills, N.J., said of the rental agencies. "Autonomous cars and ride-sharing are not the end of the rental business, but could end up being a benefit. It could be a source of profit for them."
A new revenue stream would be a lifeline for the rental industry, whose shares have trailed the Standard & Poor's 500 stock index over the past five years.
Investors had soured as the companies lost customers to ride-sharing firms such as Uber Technologies Inc. and Lyft Inc., and as profit sagged with the declining value of cars sold at the end of their fleet service. Hertz alone had a $491 million loss last year.
Some investors had speculated that both rental companies would lose business to new tech players, Morgan Stanley analyst Adam Jonas wrote in a research note Monday. The deal with Waymo "offers a challenge to the now well-trodden bear thesis on car rental," he wrote.