Profit, progress in sight for car sharing rivals

Or not. With profits proving scarce up to this point, the eventual winners may not be measured by dollars, at all.

And that's just fine for the myriad of nonprofit agencies around the country, who regard car sharing as part of broader transit systems with the sole aim of improving the quality of life for not only their customers but for the public at large.

"Anybody looking to make lots of money should probably look elsewhere," said Rick Hutchinson, chief executive of San Francisco-based nonprofit City CarShare. "We exist only to solve a social problem: The overdependence on the automobile."

Others companies, like those answering to shareholders, see it differently. Zipcar Inc., for instance, smells a market primed for frenetic growth while rental car giants are whetting their beaks in hopes of cashing in on what may or may not turn out to be a lucrative venture.

"We definitely see this as a mainstream service. Just two or three years ago people were still questioning just how big is this going to be," said Zipcar CEO Scott Griffith. "The conclusion is that this is going to be a huge category."

Griffith points out that Zipcar is already making money in the big U.S. cities like New York and San Francisco, and that the overall profit will come when the business matures in more recently launched markets like Vancouver and London.

Hutchinson's City CarShare and the like have carved out their niche primarily in cities and college towns, offering hourly rentals for about $6.50 an hour. An application and annual fee is oftentimes charged as well.

This is nothing new around the world. European cities, not nearly as car-centric as those in the U.S., have offered car sharing for decades. The real global push gathered momentum in the late 1980s, when several nonprofits started popping up in Germany, Canada and the U.S.

Later, businesses emerged that were convinced profits could be made from what had initially been an industry seen as an extension of public transportation systems.

Today Cambridge, Mass.-based Zipcar, after swallowing up rival Flexcar last year, is the industry's biggest player. And while the marketing team likes to speak of easing congestion, reducing emissions and alleviating oil dependence, making money is clearly a top priority.

That's something that Zipcar, despite its growing revenue stream, has yet to accomplish. But Griffith vows that it's just a matter of time.

"If we opened no new cities, we'd be profitable by next year. But with the market expansion as attractive as it is now we're going to launch in new cities," he said.

Still, as the competition mounts, the for-profit companies face a steep challenge, according to Dave Brook, who founded Carsharing Portland in 1998 and now works as an independent consultant for the industry.

"The nonprofits have lower requirements for return on investment and they don't have an extra layer or two of management to support _ 'lean' as they say in business _ so they can survive with much slimmer profit margins," Brook said.

Greater scale may be the key to make up for the thin margins.

Currently, Zipcar's member base is approaching a quarter of a million, with the company looking for 500,000 customers within three years as gas prices hover near record-high levels and the broader economy keeps the pressure on consumers.

The company makes a compelling case for cost-savings. Zipcar even claims that vehicle owners who rely heavily on their own car can cut their costs in half by switching to car sharing.

By Zipcar's estimates, total car ownership costs come to $769 a month for something like a Chevy Impala or Ford Fusion. In contrast, the company's service, which allows customers to choose between vehicles like Minis, BMWs, hybrids and pickups, would cost $322 a month for drivers logging 10 two-hour, 2 three-hour and 2 full-day reservations.

"But there is so much more going on here than hourly pricing," Griffith said. "This is about a new brand, a new way of life for people in the cities. It's not a transaction-based business, it's a membership, almost subscription-model business."

Griffin exudes confidence in his business approach, but he doesn't discount the mounting efforts by the competition.

"There's room for several players to create a multibillion-dollar industry with millions of members in North America alone within 5 to 10 years," he said. "Our vision for the future is to deliver a business that results in more car sharers than car owners in the major cities."

(EDITORS: STORY CAN END HERE)

Of course, those kind of gaudy projections aren't lost on the major players in the car rental industry, though efforts on their part seem to have been half-hearted to this point.

Over the summer, Mark Frissora, CEO of ...

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