Thinking out loud a bit about P2P Car Sharing vs. ZipCar
There have been three companies now that have announced funding from excellent investors pursuing a P2P car sharing model. They include RelayRides, GetAround, and Wheelz (and there are many others too).
I think there is at least a little bit of the a sense that these companies are the next evolution after ZipCar which has been around for a long time.
But, this is a confusing case for me because I actually think that what P2P models propose to do is much more of an intermediate solution vs. a long term solution. And the long term solution already exists in ZipCar. Couple streams of thought on this:
– The problem both companies are solving is that cars are expensive and under-utilized assets. The solutions are the same: Spread the capital expense across multiple users, and increase the utilization of the asset. Let’s fast forward to the “ideal” future of this vision. Is it one where people still buy cars that they rarely use and rent it out? Or is it a world where no one really buys a car they don’t need, and just utilize shared resources with lots of people? I think it’s the latter, and that’s what ZipCar is trying to do.
– Doesn’t the P2P model become a victim of its success (if it is successful?). Again, if it works, then the next time consumers are thinking of buying a new car, they will decide not to because other options are available. But if that’s the case for lots of people, then there will be fewer and fewer shared options available, and the ones that are available will be older clunkers. The service will inherently degrade, unless the companies start owning and operating their own strategically placed vehicles. And then, presto! You have ZipCar.
– I have to imagine that the rise in these models is brought on by the success of AirBnB. But I think it’s very different for a couple reasons. First, I think there is a bit more perceived safety and control with AirBnB (even after some of the disasters that have been reported). You can actually meet the person you are going to be renting to, or you may even still be in your apartment while they are sharing the spare room. It feels like a bit more risk to give someone the ability to just drive off with your car. The more screening that you enable, the smaller the pool of potential drivers, which will reduce utlization.
– I also think the economics are pretty different from AirBnB. How much money can you really make sharing your car, and would that be enough to make it worth your while? If someone rents our their car 100x per year, 3 hours per time, $7/hour (assuming the owner keeps $6), that equals: $1800. Not nothing, but is it really worth it? And that is very high utilization. I think it’s very different to assume people will rent their cars for what might be $15-$20/session vs. renting out a spare bedroom for $100+/night. There is also a pretty natural price ceiling on these rentals. For short term rentals, it’s ZipCar’s $10/hour prices. With long term rentals, it’s what you can Hotwire with the rental agencies. With AirBnB, you have the potential for long term rentals that can be $5000+ per week. The price ceiling is just much higher.
– Maybe there are niches where this makes sense – like renting specialty/luxury vehicles, serving geographies that aren’t dense enough for ZipCar to exist, etc. And maybe that’s enough to get scale and expand. Also, it’s true that the capital expenditure is much much less in a P2P business, so again, maybe there are areas where this model will work that are cost prohibitive for ZipCar.
Anyway, I could certainly be wrong here and just missing it. Maybe it is a low end disruption of some sort. But the total cost of utilizing a ZipCar is already ridiculously low compared to the cost of owning a car. Not sure if this disruption is really going to move the needle. I’m not placing a stake in the ground, but I’m trying to understand this opportunity better. I did think Netflix was crazy when it started, and I think Chegg is a intermediate innovation as well, but they seem to be transitioning to digital pretty well. So please discuss so I can further my thinking on this.