Peer-to-peer car sharing on the rise

Even GM approves new approach

Matt Dietrichson, Feb 20, 12.

Peer-to-peer car sharing is becoming more popular, and some car manufacturers are on board, according to Time Magazine:

Why would the world’s largest car company partner with a tiny, little-known startup that could cannibalize its business by promoting car sharing instead of new-car buying?

According to General Motors Vice Chairman Steve Girsky, the reason GM recently led a $3 million round of funding for RelayRides — one of a growing number of so-called peer-to-peer car-sharing services in the U.S. — is that “our business is really mobility, moving people around.”

In other words, what matters most is that more people are driving around in GM vehicles, whether they own them or not. And San Francisco-based RelayRides, which encourages people to lend their personal cars to strangers for an hourly fee, has the potential to help in that regard.

Proponents of peer-to-peer car sharing say it could easily outstrip traditional car-sharing services like Zipcar over time. Whereas Zipcar either owns or leases the 9,500 vehicles in its fleet, peer-to-peer car-sharing companies like RelayRides, Getaround and newcomer JustShareIt (which launched this January in San Francisco) let people rent out their own autos to others at rates set by the car owners themselves. With more than 250 million vehicles already on the road today, that’s an enormous pool to choose from. A 2010 report from Frost & Sullivan estimated that some 4.4 million people will join car-sharing networks by 2016 in North America.

Even so, RelayRides is likely to get the bigger boost from the partnership. GM is gearing up to begin promoting RelayRides to the five million active users of its OnStar in-vehicle security and navigation service this spring. RelayRides’ members will be able to use their smartphones to find OnStar-enabled cars that are available for rent. Considering that RelayRides’ network of vehicles currently consists of just 200 cars in San Francisco and Boston, the partnership promises to dramatically increase both the quantity and quality of cars in its network — and help bring peer-to-peer car-sharing into the mainstream.

Quick access to otherwise idle cars is car sharing’s main draw. RelayRides founder Shelby Clark, a Harvard Business School graduate, says he came up with the idea for RelayRides on Thanksgiving Day 2008, when he had to bike 2.5 miles in bad weather to the nearest Zipcar, which he then drove to Western Massachusetts to celebrate the holiday with his family. “I was passing all these cars sitting on the side of the road and was thinking that the solution to my problem is not more cars. Cars we have. There are plenty of them.” What’s more, the average car is idle 92% of the time.

The idea makes business sense, too. Because peer-to-peer car-sharing services don’t have to pay for the vehicles they rent out (or their upkeep), they have the potential for much higher profit margins than traditional car-sharing services, and can operate more like an online marketplace such as eBay.

“When you look at traditional car-sharing or rental services, what’s interesting is how much of their money is drained out by fleet maintenance,” notes Joe Kraus of Google Ventures, which is also a RelayRides investor. For Zipcar, which reported its first pre-tax quarterly profit in late 2011, fleet maintenance accounts for about 65% of its total expenses. And according to a 2011 report from AAA, the annual cost of owning and maintaining a new car for individuals ranges anywhere from $6,758 for a small sedan to $11,382 for a SUV. For many people, says investor Kraus, “their car is the largest depreciating asset that they own.”

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