By Emily Bary
The rise of ride-hailing companies has hurt the rental-car giants, and now Lyft Inc. wants to drive even farther into their lane.
Lyft /zigman2/quotes/208999293/composite LYFT +1.28% announced Thursday afternoon that it was launching a rental-car service, allowing customers to nab loaner cars from within the Lyft app. The service will initially be rolled out in a few cities, with the company saying that Lyft Rentals is now available for “select users” in the Bay Area and Los Angeles.
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The announcement caused more pain for the rental-car stalwarts, which saw their stocks dive as the news was announced near the end of Thursday’s trading session. Hertz Global Holdings Inc. /zigman2/quotes/200655672/composite HTZ +8.16% shares /zigman2/quotes/200655672/composite HTZ +8.16% ended the session down 4.8%, while Avis Budget Group Inc.’s /zigman2/quotes/203618115/composite CAR +11.08% stock /zigman2/quotes/203618115/composite CAR +11.08% lost 4.4%. Lyft also finished the day in the red, with its stock off 1.6%.
In a blog post, Lyft described its service as being good for “road trips, moving day, errands, and that much-needed weekend escape” and promised a $20 ride credit each way for trips to the rental lot. The company also said it would charge the “market price” for refueling and not tack on mileage charges. A concierge will help customers when they arrive at Lyft’s rental lots.
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Lyft went public in late March and has had a rough ride since then; shares closed Thursday down 35% from their offering price of $72. Investors have punished both Lyft and rival Uber Technologies Inc. /zigman2/quotes/211348248/composite UBER +1.59% for their record of heavy losses, though Lyft has won some relative praise from analysts for its more focused business. Lyft’s operations are mainly domestic and oriented around ride hailing, while Uber has a more international presence and runs freight and food-delivery services in addition to its main ride-hailing business.
Shares of Lyft have added 10% over the past month, as the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.64% has climbed 2.5%.