General Motors Engineering a Dot-Com Strategy With RelayRides

When it comes to innovation, GM (NYSE: GM ) usually is one of the last
companies that comes to mind. But after its near-death experience a few years
ago, it looks like management is trying to engage in more creative thinking. To
this end, GM has struck an agreement with a tech startup, RelayRides, to provide
for peer-to-peer car-sharing. Under the program, car owners can rent their
vehicles, so long as they have an OnStar system. This onboard technology makes
it easy to unlock a car with a mobile phone, as well as leverage the tracking
capabilities. This service is likely to be attractive to car owners, who can
make some extra cash average monthly earnings from car-sharing range from $200
to $300 (which sounds better than a garage sale). RelayRides provides an online
marketplace to post the availability of cars. It also conducts a background
check on borrowers, and it issues a $1 million insurance policy on each car. If
a driver gets into an accident, the owners record will not be affected. So far,
RelayRides is available only in San Francisco and Boston. But with help of GM,
expansion seems imminent. The company has signed a two-year exclusive agreement
that starts early next year, and theres a possibility of a small equity
investment (through the GM Ventures arm). With RelayRides, GM should be able to
showcase its wares to a younger demographic that doesnt own a car yet but might
want to in the future. General Motors also could use the service to get exposure
to newer cars, such as the Chevrolet Volt. But the deal has broader
implications. It could pose a threat to other car-sharing services, especially
Zipcar (NYSE: ZIP ). While the company is a pioneer in the industry and even has
backing from Ford (NYSE: F ), it still has to pay substantial amounts for its
fleet of cars. At the same time, Zipcar faces competition from traditional car
rental giants like Hertz (NYSE: HTZ ), Avis (NASDAQ: CAR ) and Enterprise.
Caught between a nimbler car-sharing company and Big Rental, Zipcars growth
could taper off. The stock price already has come under pressure, falling from
$29.15 to $17.20 during the past six months. In light of the headwinds, the
dropoff might not be over. Tom Taulli is the author of "All About Short
Selling" and "All About Commodities." You can also find him at Twitter
account @ttaulli. He does not own a position in any of the aforementioned
stocks.