Car Sharing Gets Profitable

  • Through car sharing programs, users rent cars on an hourly basis. (Photo courtesy of Zipcar)

There’s nothing unusual about renting a car by the day.
It’s commonplace at airports nationwide, but for most Americans,
renting a car by the hour is a strange notion. Renting a car by the hour
is often called “car sharing.” Car sharing is good for the environment
because its users only get the car when they need the car. They usually
take buses and bikes to get around. Car sharing has caught on in a few big
cities on the east and west coasts. That’s largely due to the efforts of a pair
of private companies, Zipcar and Flexcar. Now those firms are poised to
expand their operations. The Great Lakes Radio Consortium’s Todd Melby
has this report:

Transcript

There’s nothing unusual about renting a car by the day. It’s
commonplace at airports nationwide, but for most Americans, renting a
car by the hour is a strange notion. Renting a car by the hour is often
called “car sharing.” Car sharing is good for the environment because its
users only get the car when they need the car. They usually take buses
and bikes to get around. Car sharing has caught on in a few big cities on
the east and west coasts. That’s largely due to the efforts of a pair of
private companies, Zipcar and Flexcar. Now, those firms are poised to
expand their operations. The Great Lakes Radio Consortium’s Todd
Melby has this report:


For the past six months, a nonprofit called the Neighborhood Energy
Consortium has had the Minneapolis/St. Paul car sharing market to itself.
The non-profit group has raised about $450,000 to buy 12 cars. Those
energy-efficient hybrids have attracted about 140 people to join the
HourCar program. That’s Hour with an “H.”


(Sound of bus stop and rumble of passing truck)


On this Saturday morning, Mary Solac is shivering at a bus stop, waiting
for a ride to go pick up her HourCar. Despite the obvious inconvenience,
she says it’s worth it.


“You don’t have to worry about insurance. You don’t have to worry
about gas. It’s like okay, I’m paying what I’m paying and I don’t have to
worry about fixing the blasted car either.”


After a short bus ride, Solac does have to worry about more mundane car
concerns… such as scraping the ice and snow off the window.


(Sound of ice/snow scraping on the windshield)


To date, Solac’s only choice for renting a car by the hour has been
HourCar. That’s about to change.


The nation’s largest car sharing company — Zipcar of Boston — is
invading HourCar’s Minneapolis turf. Nearly 50,000 people now take
turns driving about 500 Zipcars, mostly in Boston, New York and
Washington, D.C.


Scott Griffith is the CEO of Zipcar.


“Over the last several years, we’ve really focused on those cities and getting
them past profitability, past the break even point, to prove that at the
metro market level, that we can make money in this business.”


That track record enticed a venture capital firm to invest $10 million in
Zipcar.


Another big new company is also getting an influx of cash. The nation’s
second-largest car sharing company — Flexcar of Seattle — is about half
as big as Zipcar. It too has a new investor: AOL Founder Stephen Case.
He rented a Flexcar, liked it and bought the company.


In Chicago, Flexcar has paired with a local nonprofit to put 47 cars on
the street.


Zipcar, meanwhile, is also trying to get into Chicago. It wants
government agencies in the Windy City to commit to using its cars
before entering the market. The company hopes that happens sometime
this year.


Business professor Alfred Marcus at the University of Minnesota says it’s
not unusual for emerging businesses to seek government help like this.


“To get this sector going, to stimulate it, it makes sense for their to be
some public involvement, but you would hope this could take off on its
own. I think this is transitional – these public and private partnerships,
and that’s very typical when industries start.”


In Minneapolis/St. Paul, the University of Minnesota is guaranteeing
Zipcar a $1,500 per month per vehicle subsidy, but once Zipcar meets the
$1,500 minimum, that subsidy goes away. Zipcar says it expects to do
just that in three months.


At the moment, Zipcar is growing fast. It had revenues of about $15
million in 2005. CEO Griffith says it expects to double that this year, but
Alfred Marcus with the University of Minnesota says over the long-term,
Zipcar faces big hurdles.


Zipcar has only had success in large, densely-populated cities. Its target
market is young people without cars who are highly price sensitive, and
then there’s the question of where to keep the cars. They have to be
conveniently located to the people who might want to use them.


Marcus says that if these start-ups continue to grow, someday they might
be gobbled up by bigger companies.


“The ultimate aim of Flexcars or Zipcars may be to build up a fringe
business, get it going and have a rental car company buy them or have even
have a conventional automobile company by them.”


But the car-sharing company owners say they have other plans. Zipcar
boss Scott Griffith says he’s working on a 10-year plan to make Zipcar an
international company. Flexcar owner Stephen Case says he bought that
firm “to build it” and not to “flip it.”


For the GLRC, I’m Todd Melby.

Related Links

Sadness on the Peace Train

The terrible events in New York City and Washington have left a legacy of personal tragedies. For Great Lakes Radio Consortium commentator Suzanne Elston, the story of September 11th began as a journey of peace:

Transcript

The terrible events in New York City and Washington D.C. have left a legacy of personal tragedies. For Great Lakes Radio Consortium commentator, Suzanne Elston, the story of September 11th, began as a journey of peace.


I’ve never been to New York City. So when we got an invitation to visit the Big Apple and participate in a children’s peace festival, we jumped at the chance. My husband Brian and two of our kids, Peter and Sarah, were going to be part of a church service marking the opening of the 56th session of the United Nations General Assembly.
Sarah was going to carry the Canadian flag and Peter was going to give a reading. The kids were wired and so were we.


Our plan was to leave Toronto Tuesday morning by train. The daylong trip would take us to New York City. We’d have all day Wednesday to do touristy things before the service on Thursday. We’d even managed to get tickets to a Broadway play. It all sounded so exciting that I couldn’t believe that it was actually going to happen.


We’d been on the train for about an hour when we first heard the news. Our traveling companions were 18 members of the Toronto Children’s Peace Theatre, also en route to the peace festival. The director of the company received a cell phone call that gave us sketchy details of the initial attack on the World Trade Center.


At first I refused to believe it. Here we were heading for an international children’s peace festival.


It felt like we were on the voyage of the damned. We continued on our journey, barreling down the tracks to a destination that we knew we would never reach. We heard rumors – the border was closed, there was shooting in the streets. People with cell phones were frantically trying to get a hold of somebody they knew who could give us an update.


The children from the theatre group were particularly upset. For most of them it was their first time away from home, and they were scared. As we discussed the latest details that we’d heard, one of the kids started to throw-up.


We moved to another car and tried to explain to a group of university students from England that they wouldn’t be flying home the next day from New York. As the news continued to filter in, we soon realized that they wouldn’t be flying home from anywhere. An elderly couple at the back of the car sat in stony silence. Their daughter worked at the World Trade Center and they were frozen in fear.


The conductor was stuck like a moose in headlights. Most of the passengers still didn’t know what was going on. My husband finally took him aside and explained that he had to make an announcement. People needed to make arrangements, to talk to their families. But he was just a kid and as scared as the rest of us. He wanted to wait until he had something official from Amtrak’s head office.


Finally, at 11:00 a.m., he made a formal announcement. The border was closed and we all would be disembarking at Niagara Falls. It was Tuesday evening by the time we got home and saw the horrific images of what had happened.


It wasn’t until then, when we were safe and home and together that we had a shocking revelation. The first stop on our sightseeing trip was going to be the World Trade Center. For the sake of a mere 24 hours we could have been buried at the bottom of that rubble like so many others.


Our great journey of peace ended with many prayers. We prayed for the victims and their families, we prayed for peace. Finally, we gave a prayer of thanks that we’d all made it home safely. After witnessing Tuesday’s horror – that was a gift beyond measure.