Green Motion Buys U-Save: What Now?

Green Motion acquires U-Save Car & Truck Rental, and the plate tectonics in car rental shift yet again. No one should ever think the car rental market is done consolidating. But this one, who knew?

At first glance, the merger seems like an odd culture fit. Both are family-run car rental brands that operate exclusively on a franchised basis, though their models diverge from there.

Founded in 1979 and based in Jackson, Mississippi, the U-Save brand is known for renting economical cars in neighborhood markets in the U.S., with some locations serving airports. The franchise network has a small footprint overseas.

Green Motion started in the U.K. in 2007 with a mandate to be the lowest carbon-emitting car rental company in the markets it serves. The company operates about 550 rental stations in 60 locations throughout the world, with 14 in the U.S. Green Motion serves predominantly leisure airport traffic but has a presence in some local markets.

Richard Lowden, founder and CEO of Green Motion, and Tom McDonnell, CEO of U-Save Car & Truck Rental, dig a deeper into the sale. They discuss how they plan to meet a rapidly evolving market and how their diversity might be their best strength.

Merger Structure

The location count for the merged company stands at 84 in the U.S., which puts it sixth in terms of overall revenue (and fifth in locations). Lowden acknowledges the considerable revenue gap between the majors (including Sixt and Fox/Europcar) and this new combined company.

However, “It's still a good achievement for us to get to, and there’s room to grow,” said Lowden, who was just getting back to England after meeting the larger U-Save team in Jackson last week. 

The merged company remains privately held and will continue the franchise model. Right now, there are no new logo iterations or adjustments to either the Green Motion or U-Save branding.

U-Save’s existing management team is now part of the Green Motion group and will continue to serve the U-Save franchise network on a day-to-day basis. McDonnell and the senior management team will remain for at least 12 months, though that period could be extended.

“For our franchisees, they'll still be seeing the same faces that they've seen before,” McDonnell said.

McDonnell retains his separate insurance business that serves U-Save franchisees. Under the merger, a cooperation agreement will allow Green Motion to access those insurance services as well.

Brand Footprints

The combination of other franchise brands has gotten thorny in the past when it comes to territory overlap. But it won’t be an issue here, according to Lowden and McDonnell. There are only a handful of markets in which the brands overlap, and in two of them — Orlando and Los Angeles — the operators are already co-branded as U-Save and Green Motion.

“Those two brands are sitting side by side in those key markets and have flourished, so we know it works,” Lowden said. “Therefore Tom and I knew we could roll this out successfully across other markets as desired.”

The new corporate entity will look closely to make sure any co-branded opportunity won’t aggrandize either brand and widens the customer base, customer choice, and available fleet.

Dual-Branding and Franchisee Growth

This dual branding, in fact, will be leveraged as a strength and an opportunity for existing and potential franchisees. “There will be an opportunity for dual side-by-side locations where the franchisee will be given the choice to operate both brands,” Lowden said.

“We felt that putting the two companies together in a dual-branded situation would be the best of both worlds,” McDonnell said. “With the wider product offerings, technology, and ability to scale fleet, it will help our franchisees continue to grow their existing markets.”

Continued Lowden: “We've identified 70 airports in the U.S. that we're confident can support both brands together. That will be one of the big pushes. We've got a team that will focus on airport expansion in the U.S. and a neighborhood team focused on developing profitable local stores.”

McDonnell is appreciative of Green Motion’s ability to capture demand data market by market to see where expansion makes sense. “When we’re talking to franchise prospects, we can show them data on a particular market, whether neighborhood, downtown, or airport, and how best to strategize brand placement in those segments,” he said.

The sharing will flow both ways: “We're going to learn a lot on the U-Save side about airport markets from Green Motion, and we think we can share some things on downtown and neighborhood markets with Green Motion that will translate into their system as well,” McDonnell said.

OTA Connectivity & Tech Integration

As a leisure brand with airport inbound business both domestically and internationally, Green Motion is connected to all the major OTAs such as Expedia and Priceline as well as to the worldwide car rental brokers and numerous regional players.

Green Motion will bring those reservations channels to U-Save operators should they desire it — and at a lower price point per transaction. Traditionally, most U-Save operators wouldn’t need the OTAs and their high transaction costs, as they serve local insurance replacement and weekend rental business on a direct basis. “But we've learned through the pandemic that people do transact online with these neighborhood locations,” Lowden said.

Further, Lowden believes that U-Save franchisees — particularly co-branded ones — will be poised to open untapped reservation streams. That connectivity, along with the brand’s offering of a lower carbon footprint, would capture new local business types such as local government, military, law enforcement, or local corporations — “the Enterprise hunting ground,” according to Lowden.

There will also be opportunities to bring other new technologies to franchisees. That includes touchless rentals, which Green Motion has instituted and augmented during the pandemic.

While many think of touchless as an airport play, there are other opportunities in local markets that U-Save operators can leverage. McDonnell gives the example of a fixed base operation (FBO) at a local airport in which four or five vehicles could be managed remotely and accessed by pilots and plane owners.

Fleet Expertise

Lowden is appreciative of U-Save’s “boots on the ground” when it comes to fleet operations in local markets, and that expertise will remain in place. Big picture, Green Motion plans to leverage its global buying power in ways that could help U-Save operators access more volume discounts and a greater number of automakers.

This new flexibility should help U-Save and Green Motion operators meet evolving market conditions. Lowden is preparing for a further softening in car rental rates, and recessionary headwinds would make conditions more difficult for a smaller operator to access fleet.

“We’ve positioned our model to take us through the next two or three years where you will see rates come down and more challenging conditions,” Lowden said. “We're well placed for the next stage of the market transition.”

EV Transition

That model and transition includes electric vehicles.

Lowden and McDonnell recognize Europe’s head start on electrification over North America, and Green Motion’s existing footprint there. Green Motion is presently readying a dedicated EV rental station in London and is trialing EVs in some U.S. locations now.

While U-Save’s traditional neighborhood markets may not be ready for electrification now, Green Motion’s growing operational prowess with EVs will ultimately benefit smaller markets, both say. Green Motion would start by renting electric vehicles at major airports and then permeate EV rentals community to community as they are able to build their charging infrastructure.

“We're all looking into a cloudy crystal ball right about how electrification transitions over the next few years,” McDonnell said. “But I could see a scenario where the electric vehicle fleet would start in Green Motion’s airport operations and then would transfer into U-Save neighborhood operations. That cascade effect I think works very well.”

The Future

While this is Stage One of the journey, the existing base is a good place to build from, Lowden and McDonnell said.

With 14 U.S. locations at present, organic expansion was not the fast track. “If we continue at that rate, I don't think we'll make any significant gains (in the U.S.) in my lifetime,” said Lowden.

“By connecting the two companies together, you've got a great American brand in U-Save, and fantastic technology from Green Motion, which will allow the rapid growth of U-Save at airports as well as in neighborhoods,” Lowden said.

“We were able to combine with a great organization that will bring economies of scale to our franchise body,” McDonnell said. “Our management team loves the company, loves the brand, and most importantly loves our franchisees. We’ll be able to continue to work with an organization that I've known for years and have grown to really love.”