Indego automotive concept, automotive consulting, steve young

Car Club Consolidation

Saturday, 05 January 2008 00:00

I have just received my monthly e-newsletter from Flexcar the US car-sharing company that announced in October that it was to merge with Zipcar. I have followed both companies as they embody some of the principles that lay behind IndeGo. To quote from the Flexcar website “why own the car when you can just own the drive?”
 

The merger (which looks more like an acquisition by Zipcar in fact) demonstrates some of the issues with this type of business. Short term car sharing depends on having a readily accessible pool of cars within an acceptably short walking time from potential customers. This is driven by the combination of the fleet size that your business volume justifies and the availability of parking spaces which you can secure for your operation. The same pressures that drive people living in urban areas to consider car sharing as opposed to car ownership, i.e. parking difficulties, mean that pressure on car sharing parking sites is intense. By splitting the available sites between two or more competing businesses makes the challenge of having cars available close to the customer tougher. Simple statistics tell us that the challenge is already going to be significant if two companies with discrete fleets are competing for the same customer.

Car sharing is therefore linked to scale. It is the reason why Netjets can make a commitment to their customers to have an executive jet available on demand, whereas a smaller operator could struggle to match a specific booking request weeks in advance. If consumers are going to be attracted in larger numbers to any form of car sharing, whether it is short term like Flexcar and Zipcar, or longer term like IndeGo, there needs to be a minimum scale that allows you to economically always be able to meet the transportation need on demand with the minimum capital tied up in an idle fleet.