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Volkswagen set to acquire Europcar

Original date of publication: June 29, 2020

Kemwel car rental and travel newsKemwel - The global car rental industry could undergo some rearrangements in the upcoming months if Volkswagen (VW) acquires Europcar Mobility Group, according to Automotive News Europe. Not only does the French firm own Europcar but other Kemwel partners including Buchfinder, Fox Rent a Car, among other prominent trademarks.

Shares for Europcar Mobility Group have already increased by 17 percent during a recent Paris trading session following this scoop, according to Bloomberg. 

Both entities are still in preliminary discussions over this prospective deal meant to expand VW's electric car rental fleet with additional sales channels and vehicles. Private equity firms such as Apollo Global Management have also scoped out potential partnerships with Europcar that has a market capitalization worth €390 million (US$441 million).

Market capitalization is the value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price.

VW’s potential Europcar Mobility Group acquisition

Cheapest car rentals on the webInterestingly enough, VW used to own Europcar Mobility Group before the holding company sold its subsidiary to  the Eurazeo investment firm in 2006. Originally, the German firm planned to be a “mobility services provider” minus the ownership of a car rental company.

However, now VW may reverse this decision and buy back Europcar Mobility Group at a discount rate compared to original selling price of €3.32 billion (over US$3.7 billion), said Reuters. As of today, Europcar Mobility Group’s market value is also €420 million (about US$470 million), according to sources.

For VW, the German automaker intends to streamline its fleet if the purchase comes into fruition. This includes a plan to grow its mobility services such as rental and leasing programs for electric cars. Another aspect of the deal would entail Europcar providing its sales channels for electric car fleet to VW, reported Bloomberg.

Low car rental demand

Such a development comes as Europcar Mobility Group tries to avoid a similar fate as the U.S. company Hertz Global Holding Inc. that filed for bankruptcy in May due to the COVID-19 international travel slump. Some financial losses have become irreparable as car rental demand continues to shrink.

Ever since the World Health Organization declared a global pandemic on March 11, the average number of daily commercial flights have also been on plummeting. Flightradar24 recently released data showing how daily flights fell from 100,000 in January and February of 2020 to 78,500 in March and 29,400 in April.

As commercial flights continue to get cancelled, the global tourism industry also braces for 50 million decimated jobs. Things are particularly uncertain for United States car rentals since the U.S. Travel Industry estimates a decline worth US$910 billion, seven times more than the tourism dip following 9/11, according to Forbes. Even more, recently the EU excluded the US from its draft list of welcomed visitors based on the intensifying public health situation. 

So far in the pandemic, Europcar managed to secure major financial support to withstand the storm. Reports say that this included a €220 million loan (US$247 million) from France.