The merger, announced today, between Zipcar and Flexcar (whose corporate identity is Mobility, Inc.) is a survival strategy in a business that pits our desire for a greener future against the hard reality of expensive assets and resource allocation.I discovered Flexcar a few years ago, when a friend went to work at its Portland office. Soon I was trying the service as part of a "low car diet," giving up my car in order to walk, bike, bus, car share. I loved the idea but was struck with the high cost and relatively low efficiency of the service; in order for the service to pencil out (and pay for those many hours cars spent sitting in festively-marked parking spaces) the hourly rates for using a car were $8 to $9. When you consider a typical person's car usage -- get up in the morning, drive somewhere, leave car there for several hours, drive home, doing errands along the way -- you quickly realize it doesn't pencil out ($90-100 a day to use a car). However, if you're only using cars for very brief errands; picking up recycled lumber for your chicken coop, for instance; $20 a trip versus $300 or more each month to maintain a car, works out.
So it's economical for an individual who makes (say) a couple of monthly jaunts to an out-of-town picnic site or party each month, one errand around town in a week, and a weekend bed & breakfast getaway every year. It's sensible for corporations who would rather put the liability involved with company vehicles on another entity. But does it pencil out for the asset and liability holder: Flexcar and its chief competitor, Zipcar?
My thought was, no. I did the basic spreadsheet in my head -- $9 an hour with most cars used 20-30% of the time (a guess based on reservations when using their online service). Accounting for insurance, car payments, and management, I figured the company must be making a tiny profit. But then I used the service and discovered a problem: users treat the cars terribly. And not just that, but in more than one occasion, I found a car that had some serious body damage or interior trashing. Trusting users to return the car in usable condition -- and often having only a few minutes between one user and another -- leads to poor accountability. If three people have used the car in the space of eight hours, and they've all been in too much of a hurry to clean up their trash, they've all had a sticky, cruddy experience and they've all spread the blame around. And who wants to get into a car, barely on time for a meeting, only to discover the previous driver had a fender-bender and you'll have to either report the accident or go to your meeting dragging a bumper?
When I started watching the Flexcar spaces around town, I noticed that the cars in those spaces changed frequently, as much as once every three or four months. That's a high turnover for expensive assets, I'd bet even higher than rental car companies experience. In markets where Flexcar and Zipcar competed, like Washington D.C.? The small extra cost of competition must have destroyed the two companies. (For the record, Zipcar is the larger company, with 3,000 vehicles to Flexcar's 1,500).
While my analysis is all based on observation (both companies are private), I can only imagine that the merger was one of survival and not one of happy, warm and fuzzy synergies. I honor the carsharing mission, though there are certainly a lot of kinks to work out; here's hoping that reducing competition in the market will lead to its continuance.
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Reader Comments (Page 1 of 1)
10-31-2007 @ 3:00PM
Kinjal said...
Its great they merged better for customer. I used to live in philly and they have another phillycarshare. Which is any time better than these two. I think this concept will work in future.