Car Rental Companies Get Into the Business of Sharing

Sept. 30, 2008 — -- Car sharing, mostly popular among downtown residents who don't own cars, is going corporate.

At least two rental car companies are eyeing corporate car sharing, which would allow employees to rent a car by the hour for errands and customer meetings.

Enterprise says its nine-month experiment in car sharing, branded as WeCar, will now be available to some corporate customers, government agencies and universities nationally. U-Haul's car-sharing unit, U Car Share, will also market to large customers.

Without revealing specifics, Hertz says it will launch a car-sharing business on a limited scale before the end of the year. The industry pioneer Zipcar, which dominates city markets, has also been aggressively courting businesses.

Car sharing is an online business that rents to people who don't want to deal with the hassles of car ownership. It generally works like this: You register online and pay an annual membership fee. Then you reserve a car on the company website and locate the designated parking spot on city streets or private lots. The membership card, equipped with a smart chip, unlocks the door, and the ignition key is in the glove compartment. After you are done using the car, it must be returned to a designated spot.

Gas and insurance are usually included in the price, ranging from $10 to $15 an hour. Tax rates vary, with some states charging car-rental tax while others exempt car sharing. As of July 19, U.S. car-sharing programs had about 279,000 members, according to the University of California-Berkeley's Innovative Mobility Research.

In the corporate setting, car sharing can happen in various ways. A large company may request a fleet of cars on its parking lot so that employees have quick access. Small companies that can't promise a minimum revenue can instead sign up for corporate accounts, with employees seeking out cars in nearby streets along with the general public.

Car-sharing companies say their services can encourage employees to use public transportation for commuting. It also frees companies from leasing and maintaining cars and keeping track of miles and reimbursements.

This is not the first time that rental-car companies have deviated from their traditional business. In the last few years, they began dabbling into hourly rentals as a way to compete with car sharing. But it required customers to walk in to the store to pick up and drop off the car, a major disadvantage in courting customers who are looking for convenience.

But car sharing is a different, self-service business model that will require rental companies to beef up their technology in online booking, real-time car availability information, theft prevention, fleet management and back-end billing, not to mention tracking cars in varying locations beyond their branches.

Industry consultant Neil Abrams says the transition for rental-car companies won't be difficult given their size, vast fleets of cars and deep pockets. "They have the wherewithal to service those car-sharing markets fairly rapidly."

A closer look at car-sharing competitors:

•Zipcar. Zipcar was one of the first companies to expand into markets beyond urban centers. The Boston-based company, which merged with former rival Flexcar last year, now has 5,500 cars and presence at 120 universities and 8,500 businesses that either have dedicated cars or corporate memberships.

CEO Scott Griffith says the company will continue to fine-tune its features to be more competitive. For example, it will introduce by the end of the year two-way cellphone texting that lets customers extend the rental period without logging back onto the Web.

"We don't see car rental as our competitor. We see car ownership as our competitor," he says.

•U-Haul's U Car Share. U-Haul started car sharing a year ago with a pilot program, but it required customers to pick up the car at a U-Haul branch, thus limiting rentals to business hours. Earlier this month, U Car launched a revised program that allows customers to book online, find the nearest U-Haul location and use a membership card to open the car door even when the store is closed, says Mike Colman, program manager of U Car Share.

It's still a limited program, with only 75 cars and seven cities. But the company hopes to expand the business to large companies, universities and city centers in the coming months, Colman says.

•Enterprise's WeCar. The St. Louis-based company has been monitoring car sharing for years. In 2005, it launched hourly rentals at many large city branches to appeal to short-term renters.

But "car sharing is the wave of the future," Enterprise spokeswoman Lisa Martini says.

About a year ago, Enterprise informally began its first car-sharing program with Google, using plug-in hybrids. Soon after, it launched a trial program with Washington University, the city of St. Louis and outdoor gear retailer REI.

Enterprise Senior Vice President Jeff Parrell says demand from corporate customers continues to grow, and, for now, the company plans to focus on providing dedicated cars for institutional customers that can guarantee minimum revenue.

Expanding to urban markets is a possibility, he says.