Business Driver: Corporate use may be key to carsharing?s future
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Carsharing is on a tear in Canada.
Starting this month, the world?s largest carsharing company Zipcar ? acquired by car rental giant Avis Budget this January for about $500 million ? is making its cars available at Pearson International Airport, along with several other airport locations across North America.
Montreal is also eyeing a new carsharing model, a service similar to the one introduced by Car2Go in Toronto and Vancouver. The Daimler company allows users to pick up its Smart cars without a reservation and drop them off anywhere in the city ? an alternative to traditional carsharing popularized by Zipcar and AutoShare in Canada which requires members to reserve a car beforehand and return it to its pick-up location.
While the City of Montreal is heading the initiative, it intends to outsource the operation. So far, Canada?s own Communauto and Car2Go have courted authorities for the contract. Given Car2Go?s resounding success since launching in Toronto last summer (it signed up about 10,000 members in its first year), it might ultimately edge out the Quebec-based carsharing operator.
But here?s the real kicker: carsharing is also moving out of its traditional comfort zone of densely-populated urban areas such as Toronto, Vancouver and Montreal to smaller cities. Several carsharing co-operatives have sprouted in small British Columbia towns over the last few years. Now the phenomenon of short-term rentals is poised to hit Atlantic Canada.
Moncton will soon get its own carshare service, Autopartage Codiac Autoshare, the first of its kind in New Brunswick. About 350 people have signed up so far. In Charlottetown, a company called Carshare PEI is eyeing about 100 initial members to set up its own service.
Closer to home, AutoShare is pursuing a two-year pilot with the city of Mississauga. The Canadian carsharing pioneer, which has been around since 1998, made a similar attempt in the Port Credit area a few years back without much success. If the new program works out, the company could become the first one to stake a claim to the impenetrable suburban frontier.
In a recent study, Frost & Sullivan pegged the number of Canadian carsharing users at around 100,000 in 2011 and expects total membership to reach about 1.4 million by 2020, with a compounded annual growth rate of more than 30 per cent.
Profitability ? often elusive for carsharing operators ? is on the rise as well. AutoShare has been making money off its operations since 2005. Car2Go beat expectations by turning profitable in several German cities by end of 2012 and as its membership grows, it will most likely see black in Canada by 2014.
Only Zipcar has struggled despite being most recognizable of all carsharing providers. In fact, the Cambridge, Mass.-based company?s underperformance has always baffled me a bit. Maybe it grew too fast too soon or maybe it has been spending too much on branding efforts.
However, Zipcar has reduced its losses over the last few quarters and the Avis Budget takeover is expected to cut operational costs by another $60-70 million ? so it might finally start making money by the end of this year.
Economies of scale have surely lifted the viability of carsharing. So far, membership volumes have come largely from personal users ? people who do not own a car, live in downtown cores and can make do with periodic use of a self-driven, four-wheeler. These types of users ? university students, young professionals, environmentalists ? will continue to fatten member lists in the future.
But, the number of personal users can plateau once the low-hanging fruit is gone. So, to ensure long-term business sustainability and higher profits, car sharing operators must aggressively target corporate usage.
Most Canadian carsharing operators are currently wooing business customers with special corporate rates and flexible usage agreements. While it?s a neat strategy to seek a piece of a company?s employee mobility budget pie, I think offering direct fleet replacement could reap bigger dividends.
For instance, carsharing companies could target organizations such as hydro companies, city governments and municipalities, who operate their own light-vehicle fleets. In these days of rampant budget cuts, fleet maintenance has become a key cost issue for many of these organizations. Carsharing providers could make their cars accessible to corporate employees during work hours at affordable rates. Those same cars could then be made available to personal users during evenings and weekends. This way, companies reduce their operational costs while carsharing providers can ensure that their vehicles are being used to their peak capacity. A possible win-win for all.
Currently, Vancouver-based carsharing co-op Modo is doing something similar and probably offers the best template for business carsharing or fleet replacement in Canada. Modo has signed up nearly 600 City of Vancouver staff members so far, enabling the city to reduce its own fleet by 20 vehicles.
AutoShare is pursuing a similar model through its Mississauga pilot and is actively wooing, with some help from the city, government employees to sign up for the service.
Kumar Saha is a Toronto-based automotive analyst with the global research firm Frost & Sullivan