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Turo Continues to Challenge Car Ownership as it Expands into BC
Having only just celebrated its first anniversary in Canada in April 2016, Turo has now expanded into British Columbia for the first time since its launch in Alberta, Ontario and Quebec
When Brett Maragno and his wife contemplated buying a sleek Tesla, the last thing they wanted was to be confined to a 15-minute jaunt around the dealership’s test-drive route with a chatty sales rep.
“There’s no point driving a brand-new car around the block on a smooth road,” says Maragno. “We’re the kind of people who will rent a model we’d like to buy, and drive it for a whole weekend to learn its strengths and weaknesses.”
“My wife didn’t know where to rent a Tesla, so she went online. Turo popped up right away,” he recalls. But Turo is no rent-a-car company. It’s a peer-to-peer auto sharing service that permits car owners to post their personal vehicle online and invite others to rent their car for the day or even weeks of cross-country travel. It’s been described as the Airbnb of automobiles.
The Hamilton, Ontario, couple found a Tesla Model S in downtown Toronto and rented it from the owner for a four-day weekend to tour the Niagara wine region.
“It had around 40,000 kilometres on it, which was helpful. I learned that they’re well put together with no squeaks or rattles,” says Maragno.
As their first electric-car experience, the Maragnos discovered that the Tesla had addressed dreaded range anxiety by constantly updating the locations of the nearest rapid-charging stations on the vehicle’s massive navigation display.
The feature assuaged their fears about driving long distances in an all-electric vehicle. That, combined with the car’s smooth and hushed demeanour, sealed the deal. They bought their own Model S 75D shortly after. They were suitably impressed with Turo, too.
“I had to become a Turo member first. It took 24 hours to review your background, before being approved,” he says. “As a member, the rental experience is completely online with no hassles. When I came to pick up Dave’s Tesla, he didn’t ask for identification or money or anything.”
Turo: Putting the world’s 1 billion cars to better use
Having only just celebrated its first anniversary in Canada in April, Turo has been growing by leaps and bounds. There are already 220,000 members in Canada and more than four million users around the globe. It’s now expanded into British Columbia for the first time since its launch in Alberta, Ontario and Quebec in April 2016.
Originally called RelayRides, it was born in Boston in 2010 and rebranded as Turo in 2015 to give the company a more international handle that’s both memorable and easy to pronounce in any language. Turo connects local car owners with a diverse community of local and international travelers looking for the perfect vehicle for their next adventure. It’s also a pioneer of the so-called “sharing economy.”
“Must we own socially critical commodities [such as homes and cars] in order to access them and reap their benefits? Increasingly, the answer is becoming, no, not necessarily,” writes Turo CEO Andre Haddad of the sharing economy that millennials, and others, are beginning to embrace.
Keeping car dealers up at night
If peer-to-peer sharing of automobiles sounds like a car dealer’s worst nightmare, there’s some evidence to suggest the capitalist precept of private ownership is not necessarily under attack. Rather than depress vehicle purchases, a study by Carnegie Mellon University in Pittsburgh suggests automobile manufacturers may actually benefit from car sharing.
In his study, economics professor Vibhanshu Abhishek found that automakers have an incentive to facilitate peer-to-peer rentals. People who are open to renting their personal vehicle find it becomes more valuable to them. As their car becomes an income generator, they are more likely to spend on a new or additional car.
“If you can rent out your car, the value of this asset increases because it can generate income for you,” explains Abhishek. Because it is out working rather than sitting idle in the driveway, the owner is more receptive to buying a more expensive and feature-laden vehicle next time, or concurrently.
Turo’s own data reveals that 28 per cent of its vehicle owners plan to purchase an additional car within the next year. Canadian “hosts” have made an average of $600 per month, often enough to recoup the cost of car ownership. The income – typically derived from seven to 10 rental days per month – often emboldens owners to buy a pricier replacement, or second, vehicle.
“The manufacturers sell fewer cars, but they sell them at higher prices,” explains Abhishek, because the vehicle has higher utility as a rental, and owners are receptive to spending more to potentially gain more income.
Professor Abhishek suggests traditional car-rental agencies will be hurt by the auto-sharing business model, though he’s quick to point out that Turo has targeted vacation travelers, while rent-a-car stalwarts like Hertz and Enterprise attend to business travelers with familiar and convenient service.
The industry reacts
Canadian-owned Discount Car and Truck Rentals has watched the emerging “alternative” business model in car sharing, and suggests its future remains to be proven.
“Our research shows a high level of anxiety in all demographics when it comes to the concept of sharing your car with a complete stranger, or borrowing a car from a stranger,” says Discount senior vice president Barry Singer. He says there’s something discomforting about giving up the keys to a family asset that can be driven at “220 km/h and end up in another country.”
“Most people in the Canadian markets that we tested found that kind of transaction a little scary. We have also heard about some car-sharing experiences where accidents happened, and the resolutions and process around that we know have been unsatisfactory for the parties involved,” he says.
American rental-car leader Avis Budget has seen the writing on the wall and adapted. It owns Zipcar, the world’s leading car-sharing network that provides members with on-demand access to a broad variety of models in cities, campuses and airports around the world. The difference is the Zipcar fleet of 12,000 vehicles is owned corporately and not by individuals.
“Seventeen years ago when Zipcar started, we were largely alone in the space. Our main competitor was, and still is, car ownership,” says Zipcar spokesperson Katelyn Chesley. “With more ways to get around the city, more people are open to sharing a car – and that is a great thing for our business and for the cities in which we operate.”
Zipcar helped to commercialize the sharing economy, and new competitors like Turo can only make the concept more popular. “Anything that makes it easier to live without a personally owned vehicle is good for our growth,” she says.
Airports a major source of friction
Not every company is as enlightened as Avis Budget. Other big players grumble about Turo’s ability to lithely sidestep around fees and taxes levied on car-rental operators.
“Car sharing is a car-rental business model and thus, should pay all appropriate taxes,” Sharon Faulkner, executive director of the American Car Rental Association, told Bloomberg News. The association counts rental-car giants Enterprise and Hertz among its members.
It’s a thorny subject because all businesses serving the lucrative airport market must pay steep fees to be on the property. Yet Turo owners arrange for pickups and drop-offs at busy airports without regard for the fees and taxes imposed on operators.
For its part, Turo is not shying away from the controversy. Turo Canada director Cedric Mathieu insists Turo is not a car rental company, and neither are the “hosts” who are offsetting the costs of owning their car.
“Airport fees and permits are associated with rental car companies that pay in exchange for facilities and infrastructure on airport property,” all hard costs that don’t apply to Turo members, says Mathieu. “We have a standing offer to all airports to negotiate a new permitting scheme and fees that are commensurate with peer-to-peer car sharing, separate and apart from existing permitting associated with rental car companies.”
Like so many business models spawned by the Internet, Turo has poached customers, bewildered regulators and introduced upheaval in the market – while customers enjoy new levels of service, convenience and savings accessed through a smartphone app.
The sharing economy may be a new, more democratized marketplace, but ironically it’s not an entirely free one. There’s plenty of opportunity for profit-taking, and deft operators such as Turo have done well to monetize peer-to-peer sharing.
Turo counts Mercedes-Benz manufacturer Daimler among its top-tier investors that wish to see the Turo brand expand globally – evidence that the sharing economy has come a long way from the granola-crunching notions of collectivism and disownership.