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Kevin McLaughlin, in driver's seat, in one of the AutoShare vehicles.
Kevin McLaughlin, in driver's seat, in one of the AutoShare vehicles.

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The AutoShare saga: A long, strange trip Add to ...

But Zipcar’s rivals like to point out that the company has yet to turn a profit — it lost $5 million (U.S.) in the quarter ending March 31. It’s also fighting a class-action suit over additional fees that are alleged to be unlawfully high. In an SEC filing related to the IPO that it is making in a low market, Zipcar acknowledges that it plans to use the funding to cover debts and pay back venture funders (notably Goldman Sachs).

The intensification of competition is not over yet. Hertz, Enterprise Rent-A-Car and U-Haul have all launched car-sharing operations in the past few years. Hertz has been particularly aggressive on the college front. “In the markets where Connect by Hertz operates, [car share]prices tend to be lower,” notes Nima Samadi, an analyst with research company IBISWorld.

Enterprise has fewer locations than Hertz, but once it ramps up, Samadi believes it could become a huge force because it already has many city-centre outlets. Rental-car agencies — a $24-billion (U.S.) industry — can leverage their existing infrastructures in a way that’s impossible for car-sharing outfits. And with a multinational presence, the big companies can globalize a business that to date has been largely local.

Car makers are also intrigued, seeing car sharing as a way to tap future buyers, test new technologies and paint themselves green. In 2000, Ford Motor Co.’s chairman told a British newspaper, “If you live in a city, you don’t need to own a car.” (The quote is now posted on many car-sharing websites.) While Ford has yet to introduce car sharing, Daimler AG started Car2Go in Austin, Texas, last year, and several other automakers have launched pilot projects or subsidiaries overseas.

Meanwhile, car-sharing’s customer profile is changing, with business and government increasingly signing up. Zipcar’s Lende says a number of companies, large and small, have set up corporate accounts with his firm, drawn by the significant savings over cab fares and the convenience of having cars nearby. Condo developers are also looking to partnerships with car-shares to help them reduce parking spaces and even to get LEED points.

Now that all North American cities with subway systems have at least one car-share operation, the industry’s focus is shifting to smaller centres that are much harder to crack. Frost & Sullivan analyst David Zhao estimates that a car-sharing business requires density of 1,000 people per square kilometre and car usage rates of 45 per cent for weekdays and 60 per cent for weekends. Canada’s sparse population has made for-profit car sharing a challenge outside the three biggest cities. Only Ottawa’s Vrtucar and CarShareHFX in Halifax operate as businesses. The dozen or so other outfits around the country are non-profits and co-ops.

Smaller cities and suburban markets may have to wait for new car-sharing models to evolve, such as so-called peer-to-peer car sharing, where individuals enroll their cars in a pool from which others can rent when they’re available (think Napster for transportation). Because the operator does not own the cars, the upfront investment is minimal. McLaughlin calls it “the software solution,” because the key element is the online system for managing vehicle inventory. The concept is young and has many uncertainties: Who deals with roadside breakdowns? How do you handle insurance? But if the idea gains traction with consumers, Zhao believes “it will change the whole picture of urban transportation.”

McLaughlin, however, sees peer-to-peer as a transitional solution with a built-in flaw. “If you own enough car to share, why own the car at all?” Instead, he sees companies like his that already have the customer-support infrastructure one day renting vehicles from individuals — on weekends, say, when some owners don’t use their cars much but AutoShare experiences high demand. It’s just one of many innovations integrating car sharing, carpooling and public transit that he believes will emerge to solve the growing problems of congestion, pollution and high transportation costs. Urban transportation visionaries predict a general shift away from car ownership to using cars as a service.

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