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

Car Sharing Competition: Hertz and Enterprise Chase Zipcar

By John Addison. New car sharing programs allow two or more people to need only one car. Each shared vehicle results in 6 to 23 cars not being owned. Once someone joins a car share program, they cut their vehicle miles traveled up to 80 percent. Introduced first in Europe, car sharing is now growing in the United States with over 200 car share programs operating in over 600 cities.

Zipcar is the leader in car sharing with over 260,000 members. Car sharing is popular with individuals who live car free in a city, with couples who share one car, with university students and staff, and with corporate fleet and travel managers.

Zipcar makes car sharing easy. After a simple enrollment a member is issued a Zipcard. Members reserve a car online or on the phone. At the appropriate hour, they go to their designated car, parked in one of many lots in the city. A Zipcard is used to enter the vehicle and drive until returned to the reserved parking space. A variety of vehicles are available in their program from hybrids to SUVs.

Hertz, as the largest international rental car company, has entered the car sharing market by launching the Connect by Hertz car sharing club, with neighborhood parking in London, New York City and Paris. Hertz plans to expand into additional cities, as well as universities, in 2009. As Hertz expands, it can leverage its established presence in 8,100 locations in 144 countries worldwide

Membership in Connect by Hertz includes insurance, fuel, roadside assistance, maintenance and cleaning. Connect by Hertz members enjoy a paperless program where they can reserve, drive and return vehicles all on their own, via the internet or phone. “Connect by Hertz supports Hertz’s diversified business model by providing best-in-class transportation solutions across the spectrum of customer needs,” commented Mark P. Frissora, Chairman and CEO of The Hertz Corporation. “In addition to being environmentally friendly, Connect by Hertz cars can save members thousands of dollars a year in vehicle ownership costs and, by leveraging Hertz’s established infrastructure, we’re the first major car rental company to be able to offer members the first global car sharing program.”

The showcase car of the Connect by Hertz fleet in the United States is the Toyota Prius. The fuel emissions of the London and Paris cars are significantly less than the voluntary target of a maximum 140 g/km CO2 output set by the EU.

To unlock and engage the Hertz vehicle, members simply swipe their membership card, the Connect card, over the car’s radio-frequency identification (RFID) reader. In car, a hands-free audio kit connects members to a Member Care Center representative should they have questions, need assistance or need to extend their rental. The in-car technology also enables Connect by Hertz to ‘communicate’ with the vehicle enabling representatives to unlock, engage and locate vehicles. The technologically savvy cars are also equipped with iPod connectivity and, in the US, NeverLost® in-car navigation systems and EZ Pass transponders.

Complete Article includes Enterprise and Corporate Programs

Car sharing is destined to grow and attract growing competition.

Copyright © John Addison. Excerpts of this article will appear in his upcoming book – Save Gas, Save the Planet. John Addison publishes the Clean Fleet Report.