How Car Companies and Rental Agencies are Creating 'Carsharing 2.0'

Many city dwellers are familiar with Zipcar and other carsharing companies cropping up in major cities and college campuses across America. The business model is based on a company leasing vehicles, placing them throughout an urban area, providing insurance, and requiring members to schedule their trips.

This "traditional model" of carsharing was established in Europe more than 20 years ago. It grew steadily -- yet somewhat modestly -- in North America beginning in 1994 in Montreal and 1998 in Portland. But things didn't really start taking off until about 2000 when two companies with national/international aspirations launched -- Flexcar in Seattle and Zipcar in Boston -- which merged in 2007 after several years of direct competition. More recently, major rental car companies have ventured into carsharing -- most notably Hertz Connect in New York City and Enterprise WeCar.

Last month Zipcar roared into the publicly held business sector, surprising even itself with the runaway success of its IPO -- resulting in a valuation of Zipcar beyond a number of the rental car companies, even though they manage a fraction of the fleet these rental car companies have. The success of this offering is a good indication that major investors see something new happening with cars and car ownership in the US. Sightline readers have been alerted to some of these changes, which, taken together, represent a significant evolution in an emerging field of "personal mobility."

Here are the major trends I see:

Peer-to-Peer Carsharing

Peer-to-peer (P2P) carsharing has the potential to dramatically expand the geographic area where carsharing is a viable alternative to car ownership -- beyond dense, close-in parts of cities to suburbs and beyond.

P2P carsharing takes advantage of under-utilized, privately owned vehicles for carsharing, and allows the owners to rent these vehicles to their neighbors. A P2P carsharing company facilitates the transaction and provides the insurance during the rental period -- protecting the owner from claims.

So far there are a several startups -- clustered in California for now, but with national ambitions -- testing the P2P carsharing waters. They include RelayRides, GetAround and JustShareIt. Like fleet-based carsharing, they require membership, bundle costs into hourly (or hourly + miles) rates, require reservations for pick-up and drop-off times, have decentralized locations, and enable unattended access to the vehicles. (The last two items are key distinctions between carsharing and car-renting.)

I think of P2P carsharing as version 1.5 of carsharing. It's a major change in the finances of running a carsharing company, since one of the major costs of doing business -- leasing or owning the vehicles -- is now a variable cost, paid only when there's a rental. (It's not pure profit either, since managing all those individual vehicle owners requires more complex operations undertaken by the company.) But it's still round-trip, reservation-based carsharing.