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Is the Avis / ZipCar Acquisition Green?

I am selling my little Honda in California, since I moved to Texas two years ago, I left a car in San Francisco to drive when I’m here.

So I’d been looking into getting car share.  Absolutely loving the concept, been trying to figure out if it is a better deal for me than renting when I come out.

So when Avis dropped half a billion dollars on ZipCar, I was pretty intrigued.  Which raised the question, does this count as a cleantech or green exit?

I mean, I’ve rejected the “IT services instead of flying argument” making web conferencing services a product green, something I used to get emails on from marketers all the time.

Zipcar’s a little like that.  Are fewer miles actually driven?  Less gas used?

How about fewer cars bought?  Is Zipcar actually replacing cars?  Or adding cars and increasing miles driven by bringing new drivers into the fleet, or making some time drivers into more of the time drivers and reducing public transit use?  I’m not sure that car rentals like Avis don’t increase the number of vehicles and maybe even miles per person in the US.

When does efficiency and better shared services instead of capital expenditures become green, and not just a good deal?

How P2P car sharing could impact Zipcar IPO

Its CEO received an accolade last week. Yet, with 7,000 vehicles and more than 400,000 members, car sharing service Zipcar has struggled to reach profitability.

A slump in average revenue per member over the last year and mounting fleet costs spelled a net loss for Zipcar of $4.67 million in 2009. And according to recent company filings, it’s now losing $4M-$5M a quarter with no guarantee of achieving profitability in 2010 or even 2011 … a familiar story from another large recent clean transportation IPO: Tesla.

Now, a handful of so-called peer-to-peer (P2P) car-sharing startups think they have a solution that could let them become profitable faster, while bringing car sharing to more markets and more potential users. Are they friend or foe to car sharing companies like Zipcar?

P2P models
While “traditional” car-sharing companies such as Zipcar acquire a fleet of vehicles that they then distribute, maintain, fuel, insure, and rent to drivers, P2P car-share companies like Whipcar (UK), RelayRides (Boston) and Spride (San Francisco) skip the ownership step. Instead, they aim to manage the relationship between car owners and drivers, much in the way that vacation rental services like VRBO connect vacationers with home and apartment owners.

The model isn’t just about cutting operating costs, though. P2P car sharing aims to capture two segments of the market left out of traditional car sharing:

  • Commuters who use a vehicle to get to and from work; whose vehicles sit in an office parking lot all day and in the garage all weekend, and
  • Drivers in less-dense areas who haven’t had access to car-sharing services at all

Little innovation needed
The ecosystem surrounding P2P car sharing is nearly identical to that for fleet-based car sharing, and relatively mature. The software and hardware components are largely in place—system operators need only make tweaks to off-the-shelf products from manufacturers and service providers. From in-car devices that operate vehicle permissions over cell networks to the data pricing plans carriers charge fleet operators to the online reservation systems for users, most of the plumbing exists.

An exception, however, is insurance. While homeowners can purchase insurance products that allow them to maintain coverage on a personal property when it is rented out to a vacationer, car owners can not. Lloyd’s of London currently offers car sharing insurance to WhipCar and RelayRides where they operate, but many states allow insurers to invalidate personal auto insurance if the vehicle is used for commercial purposes (such as a car sharing program).

How P2P companies could benefit Zipcar
The better known fleet-owning car share companies like Zipcar could become formidable allies and exit partners for the smaller P2P startups. As one CEO pointed out to us recently, the market for P2P car sharing has a strong bias toward a single, trusted brand. Cars are costly personal investments; the company that is able to garner users’ trust will be well positioned to capture a sizeable share of the market. Startups like RelayRides and Spride hope to capitalize on this kind of first-mover advantage. On the other hand, Zipcar already has a known brand.

In many ways, P2P sharing is a natural extension of traditional car sharing services, as it could allow them to offer their service in less dense areas than the urban cores and college campuses they currently serve. Unused vehicles are a financial albatross for car-sharing companies, making vehicle utilization rates a limiting factor for expansion; leveraging privately owned vehicles in markets with low utilization rates could be one solution. Similarly, privately-owned commuter vehicles could be used to expand the fleet during business hours in commercial districts, or on the weekends in residential neighborhoods.

P2P could also help speed returns on car sharing companies’ non-vehicle investments. Zipcar’s IPO filing revealed fleet operations costs of $93.36 million in 2009—nearly 70% of its total operating costs. Expanding revenue-generating services without a proportional increase in vehicle costs could be an attractive option. (Similarly, Zipcar recently began offering its reservation software to fleet operators as a way to boost revenue without accruing additional vehicle costs.) While Zipcar hasn’t publicly expressed interest in offering a P2P component to its service, others have. CityCar Share in the San Francisco Bay Area, for example, is partnering with Spride in an effort to bring P2P car-sharing to its members.

WhipCar RelayRides Spride
Location London Boston San Francisco
Car owners Free to join. Vehicles are screened by VIN for make/model/year and accident history. No safety checks are performed, and WhipCar relies heavily on self-reporting by vehicle owners. Free to join. Vehicles must pass and maintain a current safety screening (within two years from approved mechanic). N/A – service does not currently exist.
Drivers Free to join. Drivers must have a clean driving record in order to book a vehicle. $25 annual membership fee. Drivers must have a clean driving record in order to join the service. N/A — service does not currently exist.
Insurance Included. Commercial insurance provided by Lloyd’s covers drivers. Included. Commercial insurance provided by Lloyd’s covers drivers. Last month, California passed AB 1871, allowing commercial insurance coverage of private vehicles without invalidating private insurance coverage. First bill of its kind in the U.S.
Fuel Not included in rental price. Vehicles must have at least ¼ tank at pickup, and drivers must return cars with same amount of fuel as at pickup. Included in rental price. Fuel cards are included in all vehicles, and gas charges are deducted from owners monthly earnings. N/A
Rental rates Rates set by owner, based on location, make and model, as well as maintenance costs. Rates set by owner, based on location, make and model, as well as fuel and maintenance costs. N/A
Key exchange In person. Drivers and owners meet at a pre-arranged location to exchange keys for pickup and drop-off. Remote: RelayRides installs a digital controller in each vehicle (like that used by Zipcar and other traditional car sharing providers) that authorizes keycard access to vehicles during specified reservation periods. N/A, but likely to use remote system.
Partners N/A N/A City CarShare
Revenue model 15% commission on rentals, plus  users pay a £2.50 booking fee. 15% commission on rentals, plus drivers pay an annual $25 membership fee, waived during pilot. N/A

Source: Kachan & Co.

For more analysis of the expected impacts of P2P car sharing, or of other developments in the wider clean transportation sector, contact us.

(This article was originally published here. Reposted by permission.)

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. Its staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.

Car Sharing + Ride Sharing = Saves Thousands per Person

Ride sharing has long been a popular way to commute to work; people save money, have some company, and travel faster in high-occupancy lanes. At colleges, universities, and major events, people are using social networks to hook-up and ride together. More recently, sharing cars by the hour has allowed hundreds of thousands to free themselves from the $8,000 per year cost of owning a car.

In the last year, due to trends such as ride share and car share growth, Americans reduced their ownership of 3.5 million cars. Now car sharing and ride sharing are offered together.
Zipcar, the world’s largest car sharing provider announced a partnership with Zimride, the world’s leading social online ride sharing community. The partnership will integrate car sharing and ride sharing services and make it possible for Zipcar 275,000 members to seek, offer and share Zipcar rides with friends and others in or outside of their social network. It also will enable Zimride 300,000 ride sharers to use Zipcar as their vehicle, removing the need to own a car. The joint service is offered to colleges and universities; Stanford University has starting using the program.

“Zipcar is the perfect partner, given that they are operating car sharing programs on over 120 colleges and universities across the country,” said John Zimmer, co-founder and COO of Zimride. “Both companies aim to decrease emissions, reduce vehicle miles traveled and save people money. Sharing a Zipcar and ride sharing with your friends magnifies the benefit all the way around – it’s a 1+1=5 kind of impact.”

Zipcar leverages Web and wireless to make reserving and using a car by the hour easy. I am a member, with Zipcars only two blocks away. Zipcar is the world’s leading car-sharing service with 6,000 vehicles in urban areas and college campuses throughout 26 North American states and provinces as well as in London, England. As a leader in urban transportation, Zipcar offers more than 30 makes and models including a few plug-in hybrids.

“The market for our services on campuses across the country is huge. According to the U.S. Department of Education, there are nearly 13 million faculty, staff and students on more than 2,500 campuses, many of whom don’t have convenient access to transportation,” said Scott Griffith, CEO of Zipcar. “We chose to partner with Zimride because their innovative and scalable platform is a great foundation for building a national network of rides. Zipcar fills the car ownership gap for the Zimride model, since people most likely to ride share are those that are least likely to own a car.”

Given the parking constraints, socially-oriented populations, and high demand for ad-hoc transportation at universities, Zimride and Zipcar have created a customized version of their application specifically designed to allow students, faculty and staff direct access to the system.
The integrated service will allow Zipcar members to share a ride by automatically posting the date, time and destination of the Zipcar trip to the Zimride campus community. Once posted, Zimride’s route matching algorithm finds and notifies users looking for a ride. Additionally, Zimride members may find a local Zipcar to share at anytime. This is done seamlessly through a customized campus Zimride website or Facebook application.

Zipcar’s low hourly rates already include gas, insurance, parking, maintenance and 24/7 service: sharing that ride with others can lower the cost even more. This practice will also further reduce carbon emissions. Zipcar members already reduce vehicle miles traveled (VMT) by 40 percent compared to owning a car. Now, with ride sharing in a Zipcar, VMT’s are reduced even further.

By John Addison, Publisher of the Clean Fleet Report and conference speaker.

Car Sharing and Saving in a Tough Economy

By John Addison. American’s rise to tough challenges. This recession is hitting people hard. Transportation is 20 percent, or more, of many people’s expenses. American’s are finding smart ways to save. Public transportation use is at its highest in over 50 years. Commute program participation is breaking records. Americans drove 100 billion fewer miles in 2008 than the previous year.

A study by the American Automobile Association (AAA) shows that the average cost of owning and operating a passenger vehicle is 54.1 cents per mile. This is over $8,000 per year per vehicle, based on 15,000 miles of driving. Depreciation is part of that cost. Anyone who has bought a car for $20,000 and later sold it for $5,000 understands depreciation. Fuel, maintenance, tolls, parking, financing, and insurance add up. Most U.S. households have two vehicles, costing them over $16,000 per year.

The opportunity to save on transportation costs depends on many factors: living in the city or suburbs, household size, number of kids, type of work, and feasibility of car sharing.

A friend of mine is getting hit hard with vehicle costs and by being in an industry that is in a downward spiral. He and his wife are refinancing the home to stay above water. Their family of five includes four vehicles – primarily SUVs and a pick-up truck. When their youngest turns 16 this year, my friend is planning to get his son his own car. Vehicle number 5. At first glance, it looks like they have no other choice. Like most suburbs, frequent public transit is not in walking distance. Everyone is busy with work, school, sports, and community activity.

A closer look shows that this family could save over $10,000 per year. The three teenagers/young adults could share one or two vehicles. They live two-miles from a main street where public transit is reasonably frequent. All are great athletes who could bike to and from transit. Transit includes express buses during morning and evening commute hours that connect to a major downtown, other transit systems, rail, colleges, and more.

No one likes to deal with conflicts with teenagers and vehicle sharing is sure to create some conflict, yet communication and conflict resolution are important lessons for teenagers to learn. Family members might surprise you in creating sharing solutions that work, especially when bike and transit options are there. Taking the bus or biking to and from high school is not the end of the world. A young adult that insists on having their own vehicle can take the responsibility of working part time to pay for the vehicle, insurance, and fuel.

For years, Mark and Lisa Williams shared one vehicle. Both Mark and Lisa commuted during similar work hours from Elk Groove to Sacramento. They rode to work together. By riding together they saved up to an hour daily by using the HOV lane for vehicles with two or more passengers.

They also saved the $1,740 per year that would be necessary to pay for two Sacramento parking spaces instead of one. Mark and Lisa were not always able to commute together. When their jobs were miles apart, Lisa would take Mark to the nearby light rail that transported him to Sacramento. The Williams, including their son, never ceased to find irony as the three of them in one vehicle drove past the three vehicles parked in the driveway of a single neighbor.

When their teenage son approached driving age, the Williams bought a second vehicle, a Toyota Prius. Most of the time, the three rode together, leaving their SUV in the garage. When someone was going in an opposite direction, then the second vehicle is used. After seven months, they we’re using the SUV so little that they could not justify the cost of keeping it. They are back to a one-car family which works for the three of them. On rare occasions, the SUV is missed. Mark says, “It does require some compromises, like borrowing a vehicle when we want to use our kayaks, but it is well worth it, and will only become more so as gas prices slowly start climbing again.”

When I talk with people aged 14 to 30, I am surprised by how many do not want a car. My niece Lindsay Short was given the family’s 2001 Prius when she graduated high school with honors. She leaves the car with her parents and lives car free at the university. Like many universities, anything is faster going from class to class than trying to drive and search for the impossible parking space. On campus transit, bicycling, and walking work best. When cars are needed, car sharing services such as Zipcar, offer qualified students aged 18 and older, vehicles by the hour. What many students need is a monthly allowance that is a fraction of the cost of car ownership, so that they can pay for car sharing, public transportation, and trips home to see family. As an environmentalist, Lindsay wants to be true to her values.

You do not need to be in school to make a difference. For everyone, from those who live alone, to roommates, to families, transportation costs can be cut with flexwork, commute programs, public transit, and car sharing.

During his February 24 Address to Joint Session of Congress, President Obama stated, “The only way this century will be another American century is if we confront at last the price of our dependence on oil… That is our responsibility.”

Millions of Americans are responding to the current challenge of being financially secure; they are also addressing the need to provide their children with a future that is energy secure and climate secure. People are riding clean, riding together, and riding less.

John Addison is the author of Save Gas, Save the Planet.