By on December 16, 2010

Forget two or three year leases. Daimler will rent you cars by the minute and “is stealing customers from Mazda and Fiat with rentals aimed at drivers ready to forgo auto ownership,” reports Businessweek.

Emboldened by the successes of Zipcar and other short term rental or car sharing ventures, Daimler is test marketing its Car2go service Austin, TX, and Ulm, Germany. Soon to follow: Hamburg, Germany, in early in 2011, and dozens more cities in Europe and North America. Car2go rents Smart cars by the minute. Other carmakers, such as BMW and PSA want to develop similar services.

What makes Car2go different is that you can pick up the car and leave it anywhere within the city’s operating area. GPS tells the central computer where it is. Car2go members pay a one-time registration fee for an access card to rent a car located wherever the last customer parked.

A Frost & Sullivan study sees a shift in people in their 20s and 30s, who see car ownership as a financial drag with little status upside. Car sharing is attractive to younger drivers who grew up with monthly cell-phone bills and other pay-as-you-go services.  Add to that the lack and cost of parking in crowded city centers, and you’ve got yourself a nice business. Or a huge problem.

If that concept ever goes mainstream, then carmakers are in big trouble. A car-sharing fleet of 150,000 to 200,000 cars could eventually replace about 1 million consumer-owned vehicles, the Frost & Sullivan study figures. Carmakers face the choice of either catching that trend early or getting gobbled up by it if they snooze.

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36 Comments on “Not Buying A Car Looks Better By The Minute...”


  • avatar
    OldandSlow

    Cars2go are a common site in downtown Austin and some of the surrounding neighborhoods that are quite well-to-do.
     
    Metered street parking in the central city is the norm, rather than the exception for a 20 by 30 block area.  So, the ability to park the car without feeding one of the city’s many electronic meters is a big plus.   The other by the hour car rental gig doesn’t have this and their cars must be returned to a specific lot.

  • avatar
    jkumpire

    I’d love to read the data about this idea. It might make some sense in large cities, but anywhere else where you have any kind of commute to a store, or work, on a regular basis the daily rental idea seems insane. When these 20-30 year old people grow up, they will find out why their elders love cars.

  • avatar
    mdensch

    Whatever merits this business model has, there are enough variables in the calculus that its success is far from guaranteed.
    Just how convenient can they be made?  No matter how many drop-off sites such a business has, users will still have to spend at least a few minutes getting to them and then at least a few minutes more getting to the door of their destination.
    As more operators spring up, competition will put downward pressure on fees, shrinking profitability with no concomitant reduction in operating costs.  At the same time, users will push for more conveniences such as additional drop-off sites which will increase operating costs.
    There will be a cost-effectiveness tipping point that savvy users will quickly calculate.  The more they rely on services such as this, the higher their monthly costs.  At some point on the graph ownership will become an attractive option.
    There is already a rent-by-the-minute option that has been available in every major metropolitan area for years that will always be more convenient and less expensive than this model for many urban dwellers:  taxi cabs.
    And speaking of taxi cabs . . . . A large number of clients of businesses such as this will be former taxi users who don’t necessarily own cars currently. I think its a bit premature to predict that this means that “carmakers are in big trouble”.

    • 0 avatar
      Honest Joe

      Are you a taxi driver yourself & trying to increase your present market share?  I completely agreed with you on the cab notion until I checked out car2go’s rates.   If you were in a cab for 1 hour nowhere in the industrialized world would you be charged <$20.  Plus, why would I pay for a surly driver when I can amuse myself for so much less!

  • avatar
    findude

    Or, just use the existing fleet since the typical car is actually in use less than 10% of the time.  One interesting approach is Relay Rides (http://relayrides.com/), though time will tell if they can develop a recommender/user rating system that handles the variables of smokers/nonsmokers, disagreeable people, those who drive it like they stole it, and owners who pimp out their car only when the gas gauge needle is on E.  Of course, a similar system has always been in place between friends who share pickups on moving day, carpool when one’s car is in the shop, and so forth.
     
    People will move to options like these when the change is motivated by pain (financial in this case). I also think the apathy among the mentioned demographic (20-30 year olds) in relation to ownership cannot be understated.  It’s much stronger than the media would have us believe.

    • 0 avatar
      geeber

      I don’t believe it’s apathy towards car ownership as much as this demographic staring fiscal reality in the face and reacting accordingly. They’re facing a crappy job market and many of them are staggering under huge student loan payments. They’ve got to economize as much as possible.

  • avatar
    tallnikita

    I’ve used Zipcar in NYC for over two years.  Whereas my prior lease cost me $900/mo with insurance and parking, Zipcar averaged $500/mo for a year.  Huge flexibility when you can pick the car that you need, such as a wagon to carry stuff, or a minivan to move people.  Garages are all around and with some planning I usually walk up to 4-6 blocks at most to get to the car.  Great service too.

  • avatar
    geeber

    This service makes sense in college towns and cities, where students can forego the cost of car ownership and still have access to a car. It also makes sense in cities (such as New York) where car ownership is prohibitively expensive. Not so sure it will catch on in other areas.

  • avatar
    stryker1

    The idea is an attractive one. Don’t want to own a car, don’t have to. That leaves more parking for the rest of us. On the other hand, the algorithms needed to efficiently run a system where the car a customer wants to rent could be anywhere in the city, and ensuring that all the cars don’t cluster in one or two areas is going to have to be very sophisticated indeed.

    • 0 avatar
      Honest Joe

      Knowing that car2go has done this successfully in both Ulm, Germany and Austin, Texas is that much greater a feat accomplished! I’d like to get my hands on that API….

  • avatar
    skor

    This type of business model can only work profitably in very densely populated areas, such as Europe, Asia and a handful of American cities.  That said, this is more proof that a large percentage of people would gladly give up car ownership if there was a reliable mass transit/sharing type service available.  As for elders being “wise”.  The older generation came of age when American global hegemony was at its peak and Madison Ave convinced them that pedestrian=loser. BTW, many of these “wise elders” now suffer debilitating diseases caused by sedentary life styles.  These people were sold on the notion that freedom comes from car ownership, and now held captive by cars since they can’t walk 20 feet without inducing chest pains.

    • 0 avatar
      dewfish

      great post. definitely agree about mass transit.

    • 0 avatar
      mdensch

      A bit off-topic.  Since you brought it up, though, health problems associated with obesity and a sedentary life style are affecting younger demographics even more profoundly than older cohorts.  Obesity rates among people 25 and under are much higher than a generation ago and much, much higher than two generations ago.  Recent local headline:  18 year old high school student died of a heart attack at his desk.  This is reaching crisis proportions.

    • 0 avatar
      geeber

      As mdensch noted, younger people are experiencing health problems associated with obesity, and they don’t drive. And note that this is a problem in many poor inner city neighborhoods, where car ownership isn’t a necessity (and many families can’t afford ANY car).

      I grew up in a subdevelopment outside of a small town (where there was NO mass transit or even cab service), and neither I nor any of my friends were overweight.

      Blaming this on cars is too simplistic. I would place it on video games, a gazillion cable television channels, and people who don’t let their children play outside anymore. When I was a kid, weather permitting, my parents, as well as those of my friends, threw us out of the house and didn’t want us back until dinner time. We were expected to keep ourselves occupied with bike riding, games, kickball, etc.

      As for the “Greatest Generation” experiencing health problems – that is because of old age and increased life spans. In the good old days, lots of people simply keeled over at 65 or so. The ones who made it beyond that were pretty hardy. Now, medical technology keeps them alive, but their lingering problems don’t go away.

    • 0 avatar
      Advance_92

      Sadly we gave up on our most efficient mass transit decades ago when buses replaced most streetcar lines and many commuter rail lines.  Now the land and infrastructure’s too expensive to re-build so we’re stuck with poor transit systems in most cities.  Then again since the CTA is planning to take five months to replace the escalator at my station I can’t imagine what it would take to restore the entire elevated structure, most of which is now well over a hundred years old.

    • 0 avatar
      fincar1

      I’m not sure that I totally agree with you here, geeber: “In the good old days, lots of people simply keeled over at 65 or so. The ones who made it beyond that were pretty hardy. Now, medical technology keeps them alive, but their lingering problems don’t go away.”
      My own experience is that my wife and I are in much better physical condition and have better health than any of our parents when they were the age we are now. Isn’t this the same for most of us nowadays?

    • 0 avatar
      geeber

      Fincar, my view is skewed by the fact that I come from a family where it seems people either died around 55-60, or lived to be almost 100 with no major problems. My paternal grandfather died of heart failure at age 56 in 1964, but his wife (my grandmother) is still alive at age 97, and living in her own home. She has never had a heart attack, stroke or cancer. Several of her first cousins also lived to well into their 90s – but her only sister died at 51 from a heart attack.

      From what I see, many people in their 60s and 70s are being kept alive by more effective and less invasive artery-clearing procedures, hip replacements, cholesterol medicine, better insulin, etc. Even 25 years ago, they would have died from their conditions. They are still alive today, but not in perfect health. For most people, that beats the alternative, which is resting six-feet-under.

      The original poster also mentions people being out of breath. That has more to do with smoking, not driving. Smoking was much more prevalent 30 years ago than it is today. (Where I work, people were still smoking in their offices just 10 years ago.) People may have quit, but the effects linger.

    • 0 avatar
      skor

      I too have noticed that enfatination of the young.   When I was going to grade school back in the bad old 70′s, my father would have punched me in the head if I had asked him to drive me to school.  If I missed the bus from high school, I walked the 4 miles home.  I wouldn’t have dared to call home.  Today, the street in front of the local grade school is jammed with soccer moms driving the kids to school in minivans, CUV’s, SUV’s.  It’s rare to see a kid walk or bike to school.  My dim-bulb sister does the same with her kids and now says she’s going to have to send them to fat camp this summer.  Well, duh!
       
      As for cars, I couldn’t wait to start driving. I loved working on cars, reading car rags and just about everything else car related.  Since those long ago teen years, my attitude has changed quite a bit.  It’s one thing to have a car as a play thing, and something very different to NEED a car.  When you need, a car, you are in fact trapped.  If there was viable mass transit available, I’d only take the car out to do the grocery shopping, or for the weekend trips out of town.  If I could land a high paying job in Manhattan,  I’d get a place in Hoboken and dump the cars entirely.

  • avatar

    Austin is the blight of Texas. For shame.

  • avatar
    Steven Lang

    I already do this in an Atlanta suburb for $15 a day. For that folks get 60 miles and no ‘clock’.
    I am sure the access to verify the car’s condition will be very limited… which would make this a panacea for folks who strip cars for a living. Many folks who need a car often need it for a reason that goes beyond the moment.
    I can see it making inroads within some very specific narrow demographics. H1-B’s and folks with other types of work visas in the United States may benefit. But a lot of these folks also want to be able to drive a vehicle out of state and travel. They are also more into ‘carsharing’ than most typical city dwellers because they ‘can’ do the math… and also because they want to become owners instead of debtholders.
    It may be worthwhile in a place like NYC where storage costs and parking can be high. But the USA is far too cheap and spread out for the prices they are wanting.
    It’s a good idea. I’ve found a better one.

    • 0 avatar

      Actually when I arrived on H-1B visa, I bought a car at CU auction within the 1st month, maybe even week, I don’t remember. A coworker drove me across the bridge to San Francisco, and I drove back in my car. I don’t think H-1B holders are generally dumb enough to rely on availability of rentals, although it depends if they have many H-4s attached. If they are signle, and are located in SF SOMA or Manhattan, perhaps it works.

    • 0 avatar
      Steven Lang

      In the cases I deal with there are at least three to four other people who drive the same car.
      They usually work together and live in the same development. Splitting the costs enables them to do the usual things without worrying about maintenance, insurance, etc.
      For the vehicles they tend to get (early 2000′s Camry’s, Civic’s, Accord’s, etc.) it works out pretty well. Plus I have folks who are more concerned about their work and seeing America. They don’t want to deal with an older car that may break down if they can split the weekly costs at about $25 a person.

  • avatar
    blowfish

    are u suppose to snap some pics before u pickup the car and snap some send along your cell phone so u can prove the car is being returned with no big gash, cuts, bumps to body after u had her.
     
    if it were in DT area and u no need to carry lots of your personal belongings then it could be a swell idea.
    Out in the burbs thats not as critical.
    the rental cant be all that cheap either. probably cheaper than taxi, more than bus, better weather protection than cycling. No need to deal with shower, change of clothing when u start to smell like a Goat.
    no more parking hassle. But someone has to pay for these DT parking too.

  • avatar

    I like Car2go’s idea of dropping it off wherever you like.  My friend uses zipcar and citycarshare and both of them require you to drop them off where you picked them up.  I think these services start making sense when you’re in an area with zero parking, or parking that costs major bucks.  It’s nice to have a weekend car too if you don’t use it that often.  My friend checked out a Tacoma to help me move and that worked out to be less than a uhaul since we used the cheaper night rates.

  • avatar
    BMWfan

    Just what I’m looking for. The automotive equivalent of a “hot sheet” motel, with god knows what smeared all over the inside. How are these cars cleaned? Who verifies that all of the parts are there when the last user is done with the car, and I don’t get ripped off by the company claiming that I damaged the car? I had a rental car company try that with me once. They tried to claim that I had put a small dent in their car, and wanted to charge me. I E-mailed several digital pics of the car, timestamped and dated, that I took of the car before I drove from their lot. I offered to see them in court, but they never took me up on the offer.

  • avatar
    fincar1

    “Sadly we gave up on our most efficient mass transit decades ago when buses replaced most streetcar lines and many commuter rail lines. ”
    Well, if you have to have mass transit, buses are the way to go. Most areas change over time, and the bus lines can be rerouted cheaply. Rail lines cannot, and are far too inflexible, at least in places that don’t have a minuscule growth rate. And that’s not even getting into the expense of constructing and maintaining them.

    • 0 avatar
      Adamatari

      Rail is the most efficient in terms of energy used per load, the catch being that rail holds a ton but when empty it’s obviously inefficient. The other advantage, energy wise, is that rail is typically electric, which is much more flexible than gasoline or diesel (electricity can be produced in many ways and is not tied to the price of oil).
       
      The other aspect – that bus routes can be rerouted – is putting the cart in front of the horse in a sense. In places (like Boston) where rail exists, services and housing are built around the rail. In fact, this often happens – in Portland, they put in a streetcar through the Pearl District and downtown, which turned a rough area into something quite nice. If you put in a highway, the opposite effect occurs. Bus routes do have a place, but they work better as a supplement to rail for suburban users rather than as the sole choice for public transit.
       
      As for “miniscule growth rates”… Welcome to the future, should I remind you of what’s going on now? Or do I only need to convince you that we’re not going to get back to bubble era growth again anytime soon? Streetcars make sense, encourage dense development, and are more efficient and comfortable than buses. With the costs of driving only going up (especially relative to wages), things are going to change. Streetcars worked very well in the past and are probably going to become more popular again in the future.

    • 0 avatar
      mcs

      The trains also have the advantage of being able to avoid road traffic. In Boston, both the commuter rail and subways are fast (well, excluding the green line street cars I suppose) even at rush hour. The buses still have to fight it out with the cars

  • avatar
    jimbowski

    YES!  I want to rent a new Ram 1500 4×4 for our once a month snows and then a 3500 for the summer weekends when I am pulling an enclosed oval-kart racing trailer!

    • 0 avatar

      I’d love that too, but I don’t see a business case for using cars other than cheap compacts.  All the zipcars I see around here are priuses and scions.  I would love to be able to have a mustang gt convertible for a few hours for a Sunday drive.

  • avatar
    jerseydevil

    I use Philly Car Share when i need a car other than my Golf.  They have Mini and VW cabrios for a day at the shore, a few BMW’s to impress, some lexii, and mostly prius and honda elements, trucks, suv’s, all sorts of cars. If I didnt need a car for work, id dump car ownership in a heartbeat and use this service exclusively.  Ha, I have like 100 cars at my beck and call!  Its great!  And I am not a college kid, I’m 60.  

  • avatar
    ciddyguy

    I’m lucky I live in Seattle where we have a decent bus system, a light rail system going in, currently the line to Sea-Tac Airport from Seattle is up and running and originates at the Bus tunnel in Downtown Seattle which is shared by buses.
     
    A new Capitol Hill line is under construction as is a short connector line from the bus tunnel to Cap Hill, they reinforced the ground above in anticipation of said construction (it’ll be a tunnel, like the Cap hill line will be for much of its length) and I think they are working on the line to Bellevue via I-90 and we also have a regional bus system that ties in with Pierce Transit (Pierce County), Metro (King County), Community Transit (Snohomish County [Everett and environs]) And Kitsap Transit out on the peninsula to make getting around central Puget Sound easier if you don’t have a car or can’t drive.
     
    Seattle is slowly building several street car lines, including the one from downtown to South Lake Union, also invariably known as the S.L.U.T. There is floating a line into First Hill and Capitol Hill as well from downtown and they all augment each other so if one does not want to drive or simply not have to rely on their car for the work commute, they can.
     
    That said, we also have the Zip car and the city has designated places for them to park, including 2 next to the Thomas St Park, which is a half block up the hill from where I live. I’d thought of getting a membership with them, but realized with an elderly mother and at least one sister with health issues, needing to get on the road ASAP required that I better have a car on hand, renting or Zip may not work too well under those circumstances.
     
    Add to that, I sometimes do multiple errands where Target, Costco etc are on my list and they tend to reside in the northern burbs or in the southern end of Seattle so driving to them is more effective and takes up much less of one’s day to accomplish if one drove.
     
    Plus, if one rents and wants off street parking, gotta pay extra for it and in Seattle, that’s at least $40 extra a month, if not more and doable if one’s rent isn’t half of one’s budget (I once had off street parking, but had to get rid of it when unemployed and don’t make enough now to regain it,. some day…). Otherwise, I walk downtown or to my neighborhood stores.
     
    I think that the car won’t necessarily go away, but rather, it’ll take on new priorities as the convenience it offers is too great, but to rely on it for day to day driving may not be where its at in the future, nor for many people so rentals for those who can’t afford to own one but need a car every now and then may be a solution along with mass transit, but in the end, a variety of ways to get around may well be the best solution so one can chose which is best for what they have to do on that particular day, rather than be locked into a choice or 2 for all situations as is so often the case now.
     
    If poor, live in some inner cities, you are royally screwed as it is now for mass transit in many US cities lack a lot to be desired, if they exist in any real manner to begin with and thus you are forced to live where you don’t want to be and can’t often get work due to a lack of getting around, a catch 22 situation if you ask me.

  • avatar
    Honest Joe

    Can someone please tell me how I can get back the 1 minute & 30 seconds of my life that was wasted watching the linked video above?

  • avatar
    techsavvy

    Please checkout the wikipedia for more P2P carsharing companies (http://en.wikipedia.org/wiki/Peer-to-peer_car_rental). I agree that in 2011 you will see buying cars should decrease as car sharing will increase. Only those companies who have a better handle on their technology (hardware and software) will survive. There is a challenge to eliminate trust, convenience, security and safety, and a company whose product is targeted to that is JustShareIt (1-855-SHARE-00).


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