Wheels for an hour: Car sharing

U.S.-based car-sharing company Zipcar puts the pedal to the metal on its Canadian expansion.

Car sharing got a boost last month as U.S.-based Zipcar put the pedal to the metal on its Toronto expansion. It’s the company’s first Canadian outpost–and spells competition for homegrown firm AutoShare.

Car sharing is a decentralized take on car rental. Car sharing companies park cars in dense urban neighbourhoods, then rent them out by the hour to nearby residents using automated phone or Internet booking. (Promotion is still largely by word of mouth.) For those urbanites who don’t drive often enough to justify owning a car, renting one for about $10 an hour–gas and insurance included–is an interesting option.

AutoShare started in 1998 with three cars; it has since grown to a fleet of more than 100, serving 2,500 members. Zipcar is adding 50 more. “Toronto is probably in the top three cities in North America with high potential for car sharing,” said Zipcar CEO Scott Griffith. The company plans to double its Toronto fleet by year’s end.

Car sharing originated with crunchy-granola non-profits, but Zipcar, based in Cambridge, Mass., has turned it into a profitable business model. Unlike many car-sharing companies–including AutoShare, which charges a refundable $250 upfront to guarantee payment–Zipcar doesn’t require a deposit. (Griffith says that gets users in the cars faster.) Zipcar’s slightly higher price (it charges $11 an hour in Toronto, as opposed to AutoShare’s $9.50) hasn’t held it back in other markets. With 55,000 members and 1,500 cars on the road in North America, Zipcar said it doubled its revenue last year to US$25 million. It’s now expanding aggressively, thanks to hefty backers such as Benchmark Capital, based in Menlo Park, Calif.

Users evangelize about car sharing, but there’s no discernible effect yet on traffic patterns. Zipcar contends every shared car takes up to 20 driver-owned cars off the road. That hardly registers in the Greater Toronto Area, home to 2.5 million cars. Clearly, car sharing won’t banish gridlock any time soon–but it has lots of growth potential.