Zipcar and other car-sharing companies rent to young urbanites. Now Avis wants in. But will car-sharing continue to cater to a limited demographic?
Liana Hill signed up for a corporate Zipcar account in December. "At first we signed up mainly for the parking, because it's so difficult to park in Back Bay," says the store manager for the Ibex Outerwear company's location in Boston's Back Bay. The car subscription service is ideal for her store's particular needs: The business doesn't use a car regularly enough to own one, and employees mainly commute via public transportation.
Ms. Hill and her staff use the car service for quick, irregular day trips – "Making a Home Depot run for soil and plants, or when we need to go to a meeting at corporate headquarters in White River Junction [in Vermont]." Reimbursement for gas and parking from Ibex when using their own cars for such errands "far exceeds the cost of using Zipcar," she says.
About 750,000 Zipcar members have similar motivations in their personal use. These are people who don't need a car on a regular basis, but could use one for the occasional errand – a trip to Target, for instance, or helping a friend move. They pay an annual membership fee plus an hourly use rate for access to cars parked in various locations in each city. Gas, insurance, and tolls are included. All they have to do is share the service with other users.
It can even be a way to make money. RelayRides, a Boston-based company, pairs car owners who use their rides infrequently with potential renters. An owner lists a profile of his or her car online, sets an hourly rate, and pays RelayRides a 40 percent commission.
Car-sharing services are part of a larger trend of "sharing" commerce made possible by the Web and the changing priorities of today's young adults. There are services to borrow and share for just about everything, from baby clothes (Moxie Jean) to vacation lodgings (homexchange.com).
"It's a macroshift that's tied to the idea of access over ownership," Rachel Botsman, coauthor of "What's Mine Is Yours: The Rise of Collaborative Consumption," writes via e-mail. "We can pay to access goods, whether that's books, music, films, or cars, versus physically needing to own them outright. We don't want more stuff, but we want the experiences it [allows]."
In the case of car sharing, a few factors have contributed to its rise. "Re-urbanization is a big trend," says Mark Norman, president and chief operating officer of Zipcar, based in Cambridge, Mass. "Lots of people are staying in cities, raising their kids there. Empty nesters are returning to walkable communities."
"We're dancing around the issue of young buyers," says Bruce Belzowski, an assistant research scientist at the University of Michigan's Transportation Research Institute in Ann Arbor. Young adults have "different priorities than having a new vehicle," he says.
Millennials aren't buying cars in the volumes their counterparts once did. Adults ages 24 to 31 bought just 27 percent of vehicles sold in the United States in 2010, down from a peak of 38 percent in 1985.
For this group, car sharing can be a cheaper and easier option than owning a car, particularly in urban areas where parking can be pricey. Zipcar also has partnerships with about 300 college campuses – areas highly concentrated with young people, where parking and finances can be problematic.
But there are limits to the model. Car sharing caters to a fairly limited demographic – namely, educated, Web-savvy urban dwellers in their 20s and early 30s with access to decent public transportation. "It's narrow in terms of the overall driving potential," Mr. Belzowski says.
Car sharing works well in a compact city with decent public transit like Boston or New York, but Belzowski points out that more sprawling US metro areas present a problem. "Many cities are designed for having a vehicle, and it's difficult to move around those cities in a timely way unless you own a vehicle."
Another obvious drawback: Car owners share with strangers at their own risk. "I had an issue with there being a lot of dog hair in one, and I found a dog toy in the back," Hill says.
Even in car-share hot spots, having a car at your beck and call is not guaranteed. The number of available cars is still limited to the point that getting one during peak times, like weekends, requires advance planning. That could be helped as car sharing goes more mainstream – national rental car company Avis recently agreed to buy Zipcar for $500 million, a merger that should expand the company's vehicle fleet. Other major rental car companies, including Enterprise and Hertz, are getting into the car-sharing game as well.