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Top Two U.S. Carshare Firms Announce Merger
Erica Barnett, 14 Nov 07
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Zipcar and Flexcar, respectively the largest and second-largest carsharing companies in the U.S., announced late last month that they plan to merge into a single company that will operate under the Zipcar name. The merger will create a carsharing behemoth with operations across North America and parts of Europe: Flexcar has 50,000 members and 1,500 cars in 15 U.S. markets while Zipcar has 120,000 members and 3,500 cars in 35 markets across the U.S., Europe, and Canada.

A concern for carsharing proponents is whether this consolidation will lead to higher prices and worsened service, as it has in other industries. But as a longtime Flexcar member, my concern about the merger is as much sentimental as it is practical. Flexcar was founded back in 1999 in Seattle, where I live; I still think of it as a scrappy little challenger to the big bad auto industry, offering infrequent drivers like me an affordable, ethical alternative to buying a car or renting from one of the big car rental companies. And the name is evocative: "Flexcar" implies flexibility, ease of use, the notion of sharing. "Zipcar" merely sounds, well, fast.

That said, the merger says something very encouraging about the viability of car sharing in the North American market. Just as the stunning success of Toyota's hybrid electric-gas Prius shows that consumers are gravitating toward "green" choices, the fact that the two largest carsharing services are merging says that carsharing has a strong and prosperous future. Right away, members of both companies will have access to a combined fleet of 5,000 cars, and the company has already announced plans to "rapidly expand in new markets and rapidly expand the fleets" -- great news for those of us who love the convenience of having a car on demand but aren't so crazy about having to walk a mile to get to the nearest one. Ubiquity increases awareness; awareness increases demand; demand increases how many cars are available and how convenient they are.

There's a practical reason for Flexcar and Zipcar to merge, as well: The traditional car rental giants, including Hertz, Enterprise, and Thrifty, have gotten wind of car sharing's success. Eager for a piece of the action, firms like these have started opening more outlets in urban neighborhoods (Hertz recently began offering hourly rentals in Manhattan).

One big difference between renting and sharing is that carshares are membership-based organizations. You pay a fee, they check out your driving record, and -- assuming it's clean -- you're in. Traditionally, this distinction has exempted carshare firms from some of the requirements that apply to rental companies, such as the application of rental car taxes, making carsharing an especially economically accessible alternative to owning a car.

Periodically, however, local governments have attempted to end such distinctions. Two months ago, the Washington State Department of Revenue announced that "carsharing organizations are providing rental cars and are required to collect the rental car tax, along with the retail sales tax from their customers" -- a decision that boosted rates by about a dollar an hour.

This decision was ill-taken. Carsharing is ultimately very different from renting a car:

  • Unlike rental car users, carsharing members are local residents who are already paying local taxes, and who seldom or never use the convention and visitor services that are paid for by rental car taxes
  • Carsharing fosters a sense of community among members
  • It cuts urban traffic by providing residents an alternative to buying a car, as well as reducing demand for parking spaces
  • Both Flexcar and Zipcar provide fleets of well-maintained, late model vehicles, including many hybrids, which ultimately reduces demand for oil as well as polluting auto emissions
  • Carsharing promotes the use of public transportation

Fortunately for Washingtonians, Seattle-area legislators have vowed to introduce an explicit exemption for carsharing firms to the rental car tax early next year. However, as carsharing grows across the U.S., similar battles are likely to play out all over the country.

Image credit: flickr/dantc

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Is there any possibility that they'll be supporting one-way usage rather than the current limitation to round trips? This would make it much more appealing to me, and I think to lots of others. It would add an extra layer of complication but that's what computers are for, right?

Posted by: Al Luongo on 15 Nov 07

The whole point of car sharing is that it's not one-way, since you're sharing it. For instance, I'm a Flexcar member, and I live within a couple miles of a hybrid, a station wagon, and an SUV. If I need any of those types of cars, I look up the availability on the web site and reserve a slot. That way I can plan around the availability. If everyone were shuffling cars around, I wouldn't be able to do this.

I wondered what the merger would end up smelling like, but so far things are OK. Maybe the usability of Flexcar's web site will improve. :-)

Posted by: Enoch Root on 15 Nov 07

@Enoch Root: Well, one way trips would be much more difficult logistically, but they'd still support the same kind of use. If you book an SUV, the system would just make sure to shuffle one into your vicinity at the appropriate time, Just-In-Time fashion.

One way trips would be easier to combine with other modes of transport. It'd also eliminate the dead time where you need a car for a half-day round-trip, but actually only for two one-way trips.

One difficulty would come from making sure that usage is balanced. A lot could probably be done by differential pricing (ie, special offers for the unpopular directions), but that probably wouldn't suffice in itself so you'd have to pay drivers for some fraction of return trips. Hopefully small.

More complex logistics, but as Al Luongo wrote, that's what computers are for.

Posted by: sabik on 15 Nov 07



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