A Dynamic Duo: Tech Giants Pair with Car Rental Companies to Produce Driverless Services

It's every Uber, Lyft and even Yellow Cab Driver's worst nightmare: driverless technology, generated by the cohesion of both tech giants and automobile kings alike, pairings which no doubt be powerful forces to reckon with in the future.

Apple Inc. (NASDAQ: AAPL) is leasing a small fleet of cars from Hertz Global Holdings Inc. to test self-driving technology, a pact that mirrors a larger deal between competitors Alphabet Inc. and Avis Budget Group Inc. Hertz shares soared the most in almost two years on Monday following an announcement of the deal. Cars being leased by Apple are allegedly Lexus RX450h sport-utility vehicles from Hertz's Donlen fleet-management unit.

Hertz stock plummeted by more than 75% over the past 12 months amid falling revenue and profit, and investor concern about the role rental companies will play in an automotive industry where self-driving cars and ride-hailing are currying more favor with consumers.

The shares trimmed some of those losses after Alphabet's Waymo unit tapped Avis to handle its fleet of autonomous vehicles in Phoenix. Hertz subsequently rose greatly as a result of news of the agreement with Apple, bringing its intraday gain to as much as 18%, the biggest rise since July 2015.

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Apple's Veteran Executive Bob Mansfield spearheads the effort to develop an autonomous driving system, informally known as Project Titan.

On the other hand, Apple's long-time rival Alphabet Inc. (NASDAQ: GOOGL) is driving plans of its own.

Waymo, an automobile subsidiary of its parent company Alphabet Inc. along with Avis Budget Group, is dishing out a service in Phoenix, Ariz. that will allow people to ride in its self-driving vehicles with a professional driver in the driver's seat to monitor the vehicle and ensure safety. Area residents who want to use the service, which would operate like a taxi service, can apply to Waymo to become participants.

"Avis Budget Group is an ideal partner to provide fleet support and maintenance," said John Krafcik, Chief Executive Officer of Waymo. "With thousands of locations around the world, Avis Budget Group can help us bring our technology to more people, in more places."

As a result of this announcement, Avis Budget shares increased by 11%. It would be wise to invest in such endeavors now because they hold such promise for the future: tech companies like Google and Apple possess the technical know-how and expertise to make self-driving cars a reality, which automotive companies are able to offer the physical chariots to put into play the digital aspirations of the former.

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The scope of such a market is immeasurable: the absence of a need for human labor in the form of drivers could save companies like Uber billions, and spark a spin off market that could serve to produce services that embellish the automated driving experience. The institution of driverless services also implies less space for human error; and with it, lower accident rates, higher efficiency and speed. This alone could bolster the revenues of automobile and ride-hailing services.

Investors should be on the prowl for similar deals in the future: the seed has been sown, it is only a question of whose will take fruit first.