A month after Hertz On Demand came to Washington, D.C., a market currently dominated by Zipcar (NYSE:ZIP), automotive maker Daimler launched its car-sharing service, Car2go, in the city. Zipcar could face serious competition from these new entrants who are offering flexible membership terms and one-way rentals. It began with the District Department of Transportation’s (DDOT) decision last year to open up the district’s car-sharing market to other players by enabling them to bid on parking spaces, which attracted interest from Hertz (NYSE:HTZ), Daimler and Enterprise (NYSE:EPD) and made Zipcar lose access to 80% of its reserved parking spaces in the city. Zipcar has over 673,000 members who use approximately 9,000 of its vehicles.
How Car2go Differentiates Itself From Zipcar
With its 200 cars, Car2go hopes to tap into Washington, D.C.’s huge car-sharing market that is currently dominated by Zipcar with its 800-strong fleet. Car2Go also operates in San Diego, Austin, Texas and Portland. Loaded with RFID technology similar to Zipcar, Car2go differentiates itself from its larger competitor in the following ways:
- It offers “free floating” cars on-demand that can be picked and dropped at different locations. In comparison, Zipcar requires cars to be dropped off at the same parking location they were picked up from.
- It also offer rentals by the minute, unlike Zipcar’s hourly rates.
- It charges one-time membership fee of $35, unlike Zipcar that charges an annual membership fee of $60.
It however has one disadvantage; it offers only one model for car-sharing.
Hertz On Demand Goes A Step Further
On the other hand, Hertz On Demand not only offers one-way rentals, it does away with membership fee altogether. With its usual car-rental business, Hertz has access to best parking spots across the U.S. and has a fleet size of 375K, 30 times that of Zipcar. It also plans to fit its entire fleet with the car-sharing compatible Eileo technology by 2013, which could be a serious threat to Zipcar’s growth over the coming years.
Market Opportunity Abound, Could Sway Existing Zipcar Members
According to Washington, D.C.’s Office of Planning, owning a car in the city costs more than $8,000 per year. This has helped raise the number of households not owning a personal vehicle in city beyond 200K. Zipcar estimates more than 10 million people reside within a 10-minute walking distance of Zipcar in its major markets. This means there is much greater potential for penetration of car-sharing services in major cities. However, upcoming competition might easily steal away market share from Zipcar.
We have a price estimate of $22 for Zipcar, about 50% ahead of the market price.