RelayRides acquires Wheelz as the car-sharing industry consolidates

By Richard Nieva , written on May 14, 2013

From The News Desk

Today the car-sharing startup RelayRides announced its acquisition of former rival Wheelz for an undisclosed amount.

RelayRides will subsume the acquired company, taking over its team, customers and intellectual property, in an attempt to expand its own car-sharing reach. Both companies allow users to rent out their cars to strangers via an online marketplace, instead of letting the vehicles go unused.

Wheelz founder and CEO Jeff Miller will help oversee the transition then leave the company to pursue other entrepreneurial interests, though he says he does not know what his next move will be. The 10-person Wheelz team will join RelayRides existing 45 to 50 employees at its San Francisco headquarters.

The big gain for RelayRides appears to be in acquiring Wheelz’s “DriveBox” technology, which enables a renter to unlock a vehicle using a smartphone, so renters and car owners don’t have to meet in person to hand off the keys. Competitor Getaround already uses that kind of technology. Right now, RelayRides has a deal with GM to make keyless entry available through the OnStar system, but those cars only represent 10 to 15 percent of the market, says CEO Andre Haddad.

Wheelz was founded in 2011 as a car-sharing company serving university students at campuses like Stanford and the University of California at Berkeley, before it launched to the general public.

The tie-up is a significant move for an industry still trying to congeal. It’s been largely a two-horse race for some time now between RelayRides and Getaround, and the consolidation suggests the market leaders will only get more powerful. RelayRides declined to say how many cars are in its fleet, but said there are “thousands” of cars across 1,450 US cities. Wheelz declined to share that information as well.

But while the individual players are jockeying to get a clear lead, the industry itself needs to mature to gain legitimacy in the eyes of insurance companies. Most have taken a hesitant – if not all out prohibitory, like Geico has -- line towards car-sharing. RelayRides has itself been embroiled in a court case involving a fatal car-sharing accident that has only caused insurance companies to proceed with more caution.

Some companies have said they will not realistically entertain the idea of insuring a car-sharing policyholder until there is quantifiable traction, such as having a certain number of claims filed collectively. Haddad hopes the Wheelz acquisition will be a sign to insurers that the car-sharing industry is maturing. “I think the insurance community is watching [the car-sharing] phenomenon closely. I think the wait-and-see attitude is expected from an industry like that,” Haddad says. “But the act that they haven’t embraced us hasn’t stopped us from growing.”

Gaining a new crop of customers overnight does increase the pool of data the company can draw from. But it’s still likely too small a sample for the insurers to take any meaningful notice. Haddad says, though, that the data could be helpful internally, to “help build a better product.” He also said that in the long term, he is open to using the data to help build insurance products that could help decide RelayRide’s rental rates or protection coverage, based on someone’s driving data, though he says nothing is planned at the moment. “It’s a very important step in getting the industry to innovate,” Haddad says.