Car sharing is coming of age. The planned purchase of industry leader Zipcar by Avis Budget Group, for about $500 million in cash, positions all the major rental companies as players in this space. And why not? Car sharing offers short-term vehicles (including battery EVs and hybrids) for all kinds of purposes, greatly expanding the traditional rental field. Here's how Zipcar works, on video:
The deal, which sent both stocks moving up, has to be approved by Avis’ shareholders, but Zipcars’ approved it unanimously. Zipcar shouldn’t change all that much, because CEO Scott Griffith and President Mark Norman are likely to stay on board. The headquarters will remain in the Boston area. Ron Nelson, Avis' CEO, said in a conference call that he's warmed to the concept. “As some of you may recall," he said, "I’ve been somewhat dismissive of car sharing in the past. But what I’ve come to realize is that car sharing, particularly on the scale that Zipcar has achieved and will achieve, is complementary to our traditional business."
Since 2011 Hertz has operated the On Demand service, which the last time I looked had 850 vehicles worldwide, more than 120,000 members and more than 250 locations globally. Enterprise Holdings has the newly renamed Enterprise CarShare, which taps into the company’s fleet of nearly 1 million vehicles and 5,500 offices in the U.S. Among the vehicles available for one-hour rentals are such green entries as the Nissan Leaf, Toyota Prius and Chevrolet Volt.
Avis and Zipcar (which are expected to get formally hitched in the spring) are made for each other, since the former needs to be a player and the latter — though constantly expanding, with annual revenue topping $240 million — hasn’t been profitable. According to the Wall Street Journal, Zipcar has recorded net losses “in each year since it was founded in 2000.” Zipcar said it expects 2012 to be its first money-making year, and revenue climbed 15 percent in the third quarter of 2012.
Zipcar has long been seen as a green hero, since it emphasizes its role in saving the world. “Zipcars are good for the planet and the wallet,” the Cambridge-based company says. “Each Zipcar shared takes at least 20 personally-owned vehicles off the road.”
Some have disputed that figure, though there’s no arguing with car-sharing as a force for reducing greenhouse gas emissions, congestion and overall well-being — especially in the cities where it can be an alternative to car ownership.
Bu a recent study from the Journal of Consumer Research finds that altruism and being green aren’t the big drivers for people taking out car-sharing memberships. According to “Access-Based Consumption: The Case of Car Sharing” by Fleura Bardhi and Giana M. Eckhardt, “The type of consumption we uncover is not motivated by altruistic concerns.” Zipcar, the study says, has tried to build a “community” (with Facebook and other tools) but the study says that hasn’t happened.
Consumers use smart cards to pick up cars strategically located in city neighborhoods, college campuses and near transit stops. Zipcar gives its cars personal names (it’s the “Mia Mini,” rather than the Mini Cooper, that customers can access at the corner of High and Main). But customers told the researchers that they don’t actually “identify” with the Zipcars.
“A communal car is shared and it’s not my car,” said Brian. The study adds, “Our informants do not relate to the brand [Zipcar] as much as they do to the attributes of the offerings. They also do not feel a connection to other Zipcar users.” Alex complains that he left his peacoat in a car, but his listing on Zipcar’s message board produced no responses.
The study fits with Enterprise’s worldview, which is that people join car-sharing companies primarily for affordability and convenience. “None of this was exactly news here at Enterprise,” said Lee Broughton, Enterprise’s head of corporate sustainability. What customers want, he said, is up-to-date vehicles and responsive customer service. I see the afore-mentioned Brian complaining about being “grossed out” by people having smoked in the car he’s sharing (despite a Zipcar ban on lighting up). But the whole model — remotely located vehicles picked up by serial customers — probably makes it hard to police users — and to apply the air freshener.
It's worth noting that a New York law firm, Bernstein Liebhard, is investigating whether the Avis/Zipcar deal is financially fair to Zipcar's shareholders. It sounds a bit like a fishing expedition, since the press release says they're looking for plantiffs. But we'll see where it goes.