The Day After ZipCar Makes a Profit - Part I


What are the implications of the world's largest car sharing company rolling into the black? Image credit:Convertible Mini, Zipcar

In the year 1 A.Z.P. (After Zipcar Profits) the biggest counterpoint against proponents of car sharing will dissipate and we may have to rethink its meaning entirely. Until the present, car sharing has been discussed in terms of being a boutique car rentalship model instead of the mobility revolution it actually represents, because when Zipcar finally turns a profit, end-use questions will start to bubble to the surface including, "Do we want a car or mobility?" Or, "Do we want more efficient electric cars or more transit-oriented development?"...Or, "Is it not an either/or question at all anymore?"
Although this is no zero-sum game, there does exist a tangible dichotomy between the electrification of our vehicle fleet and demand-side management. On the one hand, we see several electric fleet initiatives in progress — e.g., Better Place, Friends of the Earth, and Project Get Ready — but there is also a dismissive cabal promoting smart growth, encapsulated in the following adage by Amory Lovins, "Ultimately, the best mode of transportation is being there already." So, do hordes of Zipcars present a third path? How widespread could this get? How do we get there? Do we even want to?

In the realm of car sharing, Zipcar is the 600-pound gorilla. The company is the single largest private car sharing company in the world. It was founded in 1999 and exists in 50 cities, including London, Toronto, and New York. "Fueled partly by high prices at the pump and the green halo of a car-sharing model, membership (Via USA Today)" ZipCar has grown from 5,000 in 2003 to 300,000 members today. "The company acquired competitor Flexcar in 2007 and this year started licensing Zipcar's proprietary software to city governments to reduce costs (Via Bloomberg News)."

The strengths of Zipcar's model are as an online business for people wanting to avoid the "hassles" of car ownership, by adopting cutting-edge technology, and pushing convenience and ease of use. However, competitors are catching up and rolling out similar programs. As Enterprise spokeswoman Lisa Martini put it, "Car sharing is the wave of the future (Via Business Week)" Walking the walk, Enterprise began a car-sharing program in 2007 in partnership with Google Inc.

Zipcar's Big "But"

But, Zipcar has yet to post a profit; a topic that has been widely covered in the press and blogosphere. "Simply put, Zipcar's all-in-one price scheme leaves it vulnerable to volatile fuel prices and other costs." According to CEO Scott Griffith, "The solution is scale. The bigger Zipcar's customer base, the more broadly it can distribute its operating costs (Via Business Week)." One analyst believes this thinking lead to the merger with Flexcar, "a West Coast competitor backed by AOL co-founder Steve Case." The merger expanded Zipcar's base and decreased the overhead per-car. Ultimately, Case believes car rentalship is not the real competitor, but car ownership.

However, change may be in the air as Zipcar, " is gearing up to publicly sell shares in 2010 as it fends off rivals such as Hertz Global Holdings Inc. The company, which has grown from a single lime-green VW Bug to a fleet of 6,500 autos, will post its first profit in the third quarter, Chief Executive Officer Scott Griffith said (Via Bloomberg)." In fact, though Zipcar has had much success with college campuses, the company's biggest promise may reside with companies and government agencies, which free "companies from leasing and maintaining cars and keeping track of miles and reimbursements."

In the end, the biggest sea change ushered in by car sharing will be its concomitant cultural implications. Will Zipcar be able to change our conception of cars as vehicles of independence to vehicles of occasional utility? Tune into next post as I hash out the destabilizing cultural force of car sharing

By:Tali Trigg - Stanback Intern with RMI's Office of the Chief Scientist

More Zipcar posts on TreeHugger.
Service My Parking Space Zipcar
Zipcar - A Product Becomes a Service
Car-Sharing Bonanza: Zipcar and Flexcar Merge
Hertz Rolls Out Car-Sharing Program to Compete with Zipcar ....
Occasional Car Program Sets the Pace in Denver, Colorado

Tags: Alternative Energy