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Q&A: Now that Avis has bought Zipcar, can other carsharing organizations be far behind?

January 2, 2013

A new feature for Price Tags: Q&A.  Pose a question and we’ll find an answer.

First up, this question from Ken Ohrn:

Zipcar has agreed to become a subsidiary of Avis Budget, in a $ 500-million transaction.  (Story here.)

Can Modo and Car2Go be far behind?

The answer comes from Tanya Paz, currently working on a contract with City of Vancouver to update carsharing bylaws for carsharing in developments.

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The short answer is no and not likely.

Modo is a car co-operative.  In order for Modo to disband or be sold, there would have to be approval of at least 75 percent of the membership at an AGM.  It’s highly unlikely that the members would Modo_logo_red_450want to do that since currently Modo has more vehicles in more municipalities and lower prices than the others in town.

Car2Go is part of Daimler; they make cars, including the Mercedes Benz Smart car. Could they sell the Car2Go arm of their business – say, to a car rental agency? Certainly, if it became a headache to run. Their current goal, Car2Gothough, is to sell more Smart cars and for young people to start a ‘relationship’ with Mercedes that carries on when they are older so that they buy their own, more expensive version in the future. It’s currently not in their interest to have their membership test driving or “carsharing” other car manufacturers’ models as well.
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Tanya has some other helpful comments on issues related to carsharing – notably, parking on public streets and on the ethics of car-sharing.  Plus, what will happen to those second-hand Avis cars.
UPDATE: Andrew Sullivan picks up on some of the commentary on his blog here.
Access to the Public Purse of Parking
What’s more interesting is what the Avis buyout of Zipcar means for Zipcar’s access to parking on public streets or in developments, i.e. relationships with municipalities.
Access to parking 24/7 is essential to any carsharing organization (CSO). One of the ways municipalities encourage carsharing in their cities is by giving or renting special permission for on-street parking spots 24/7 – called DOS or designated on-street parking. Another way is by encouraging high-rise developers to work with CSOs so that in a new building less parking is built because carsharing is available.
In Metro Vancouver, municipalities differ on whether to treat all CSOs the same or to work only with not-for-profits. The District of North Vancouver, City of Burnaby and City of New Westminster specify that DOS parking is for a “non-profit” or “car co-op” and carsharing in developments in the City of Burnaby are for “car co-ops” specifically. These municipalities want to allocate street space or deals with developers to the local, zipcar-logonot-for-profit co-op as its operations and environmental goals align with the District or City. Burnaby’s current position is that as long as the local co-op continues to operate, there is no need for changes to their policy.
The City of Vancouver is different. As soon as either for-profit company started operating in the City of Vancouver they were granted the same access to parking on public streets as the local car co-op.  The access to agreements with developers has theoretically been the same but the structure was set up for Modo and is being revised to work for Zipcar and Car2Go more easily.
Should municipalities offer all CSOs the same access to designated on-street parking, parking permits (for parking in permitted or residents-only areas), agreements with developers, and a contract with the City for carsharing for City employees? Does this encourage more carsharing? Will this be a slippery slope to granting all car rental agencies the same perks?
If a CSO frequently sets up a table near a train station to advertise without the proper City permit, should the above privileges be revoked?
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Ethics of Carsharing
What if there was an internationally recognized definition of carsharing and a Code of Ethics and Standards of Practice? Could this be a guide for municipalities and regional transit authorities to determine which companies calling their service “carsharing” had the goals of reducing trips by vehicle and discouraging individual car ownership? U Haul, Enterprise and Hertz rent cars by the hour and call it “carsharing”. Is it?
This month marks the second anniversary of the international CarSharing Association (CSA). Carsharing organizations from four countries (Canada, US, Brazil, and Australia) are members and in 2011 various European CSOs adopted the same Definition of carsharing found here.  See pgs 2-4.
No need to read the definition unless you’re keen. It took years for various CSOs to come to an agreement on the wording; this was no easy task. You’d be surprised at which words were the most contentious. However, it’s a definition and code that dozens of regional CSOs on four continents that are for profit companies, non-profit societies or co-operatives adhere to.
Here’s the opening paragraph of the Definition:
Carsharing is defined by its environmental and social purpose, rather than business and financial objectives.  Carsharing is a service designed for local users in support of community transit and environmental goals. Its mission, vision and values lead to actions aimed at decreasing individual car ownership, reducing vehicle kilometres traveled, improving urban land use and development, providing affordable access to vehicles for all constituencies – including those less able to afford car ownership – as well as motivating residents to walk, cycle and take public transportation, and decreasing dependence on fossil fuels while reducing the emission of greenhouse gases.
Here are three key highlights paraphrased (what the non-signatories have trouble agreeing with):
  • We will not ‘dis’ other forms of sustainable transportation such as walking, cycling, taking transit in order to promote carsharing.
  • We will not enter into exclusive agreements for parking at private parking lots – i.e. excluding other CSOs
  • We will share our carsharing data (usage, behaviour patterns, etc.) with transit authorities, municipalities, and university research so we can all learn more about carsharing.
Although the CSA ethics sound like good practice, in a world of free enterprise is it necessary for companies to adhere to this in order to have access to say, on-street parking? Should we be asking our municipalities these questions? Would this be holding CSOs to a higher standard than the junk food companies that school boards strike deals with? Carsharing is a new industry – almost 22 years old. Is gathering data something municipalities should be encouraging in exchange for access to parking, etc.?
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Fleet Purchasing
The manufacturing of vehicles has a huge negative impact on our environment. Currently manufactured cars tend to last 10 years or so. Car rental agencies tend to work closely with car manufacturers as a way to test drive a vehicle before buying. Rental agencies keep vehicles for a year; CSOs tend to keep vehicles for 3-7 years.
avis_logo1If Avis buys Zipcar, it might mean that once Avis has used a vehicle for a year, instead of selling it it’s more likely to go to Zipcar for carsharing for another 2 years. However, many CSOs have been buying vehicles from Avis to add to their fleets. Will this mean that only Zipcar will have access to the Avis fleet or will Avis continue to sell vehicles to the highest bidder?
Surely Zipcar will not be able to acquire, insure and maintain the entire global Avis fleet. Avis will likely sell to Zipcar first in an area where Zipcar has competition but continue to offer the vehicles at auction (to anonymous buyers) once Zipcar is at capacity.  After all, with free enterprise, loyalty does not trump the [immediately available] almighty dollar.
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4 Comments leave one →
  1. Guest permalink
    January 2, 2013 8:57 pm

    Ultimately, the success of a venture will depend on the quality and breadth of service it provides to its customers, and that, in turn, may depend on the resources backing it (whether it be co-op members, AVIS or Mercedes).

    Interesting note about North Van, New West and Burnaby dealing only with co-ops. I wonder whether that is unauthorized discrimination (versus other for-profit car sharing organizations)? The only real difference is corporate structure and discrimination on that basis may be outside a municipality’s jurisdiction.

    If AVIS in the past sold excess cars to car sharing organizations, I would expect it to continue doing so in the future in some form – perhaps with conditions (or perhaps offsetting the cycle, selling them used ZipCars). Even before the purchase of ZipCar, the car sharing organizations to whom AVIS sold cars would have competed with AVIS’ conventional rental car business – the question is whether the head-to-head competition would effect change in the business model. Of course, there would be fewer “excess” cars to be sold, particularly in larger markets where (presumably) ZipCar would require a greater supply of the excess cars. Car sharing organizations in major centres who source from AVIS may also have to pay to transport cars from other regions to meet their needs.

  2. Richard permalink
    January 3, 2013 1:39 am

    I suspect Daimler’s motivation behind Car2Go is more testing the market for and developing capacity for the automobile as a service instead of as a consumer product. Of the average $10,000 a year people spend on an automobile, a large portion does not go to the manufacturer of the automobile. It goes for gas, insurance, the dealer, repairs, parking, etc. By operating a service like Car2Go, Daimler may actually make more money in the end. Worldwide, the market for the car as a service is likely much larger as many people don’t have the income to afford a car but could afford to use a shared car sometimes.

    With automated driverless cars coming sooner or later, the car as a service is probably the future. Daimler probably knows this and is preparing.

    • January 3, 2013 12:56 pm

      Richard, you could be right. My comments about Car2Go are taken from comments they made publicly in the US about 18 months ago.

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