Flexcar Merger off to a Bumpy Start
I hate everything, and I loved Flexcar. I loved their uncannily helpful customer-service representatives, who were always friendly, helpful, and polite. I loved the discount rates for co-op members, low-income job hunters, and students. I loved their willingness to bend the rules—like the 15-minute "grace period" they would give members who were running late, as long as no one else was waiting. Most of all, though, I loved the fact that belonging to Flexcar felt like being part of a community—a community of people who filled the gas tanks for each other (bonus: a $2 usage credit), kept the cars clean (a $4 credit), and recruited new members ($40).
Flexcar, which was founded in Seattle through a partnership with King County and the City of Seattle, sold majority control in 2005 to a team of investors led by AOL cofounder Steve Case for more than $10 million. But it still felt like a local company. In addition to discounts at local businesses, Flexcar offered reduced rates for PCC members, a carbon-offsetting program through Terrapass, and incentives through the city's One Less Car program for people who gave up their cars. When the state Department of Revenue determined Flexcar members would have to pay state and local rental-car taxes, it was two Seattle officials, Senator Jeanne Kohl-Welles and City Council Member Jan Drago, who took on Flexcar's cause.
Last October, Flexcar announced it was merging with its largest competitor, Cambridge, Massachusetts–based Zipcar. The combined company has a total of 180,000 members sharing around 5,000 cars in about 50 U.S. cities—including 20,000 former Flexcar members in Seattle. So far, neither company has turned a profit. The merger came as two of the biggest rental-car companies, Hertz and Enterprise, announced plans to start renting cars by the hour—a business model that threatened to cut into car-sharing companies' customer base.
For Seattle members, the first days of the Zipcar transition were bumpy, at best. Flexcar members who tried to access Zipcars over a recent three-day weekend discovered that Zipcar had completely shut down its service—leaving thousands of new Zipcar members without transportation on one of the busiest weekends of the year. People who contacted Zipcar for help reported reaching operators who often had little or no idea what was going on. Zipcar spokeswoman Kristina Kennedy acknowledges the transition could be "frustrating and confusing," but says most calls were answered within 30 seconds.
Even after the transition, many Seattle members reported that they had not yet received their "Zipcards," the electronic cards that open Zipcar vehicles. (One member, Josh Bis, reported that after he called Zipcar to ask about a late card, the company sent him three Zipcards in the mail.)
After the temporary inconvenience was over, more fundamental differences between Zipcar and Flexcar emerged. The biggest is that Zipcar is substantially more expensive. In addition to higher annual fees, cars that used to cost $8 or $9 an hour went up to $9.50 or $10.50 an hour, depending on whether a car is regular or "premium." The "premium" category includes not just luxury vehicles like SUVs, Minis, and BMWs, but hybrids—including Flexcar's old Honda Civic hybrids, their Flexcar stickers removed and replaced by Zipcar's sunny "Wheels When You Want Them" motto.
Zipcar's Kennedy says the company charges based on the cost of the car, not its environmental footprint, and that "the hourly rate of the hybrids is compatible with other Zipcars at the same purchase price."
Another costly change is that all reservations must now be made in hour increments, meaning that a half-hour trip that used to cost less than $5 now costs $12 or more. Doug Nellis, a Flexcar member who decided not to renew with Zipcar, says he used to use a Flexcar in Fremont to drop off groceries at his home in Wallingford, a trip that took less than 30 minutes. "Now that shopping trip will cost me around $12... so I might as well take a cab."
Unlike Flexcar's system, Zipcar's phone reservation line automatically confirms reservations as soon as you enter the car you want, with no opportunity to go over the reservation. (If you want a real person, that's $3.50; Kennedy says "many" of Zipcar's servics have been made "self-service.") This change was the final straw for former Flexcar member Marc Mazique, who says the opportunity to do final approval is "pretty crucial... lots of folks could get locked into a reservation they may still be considering if they don't realize this." Mazique says he plans to cancel his Zipcar service.
Another crucial difference is that instead of incentives for good behavior, Zipcar offers harsh punishment for the slightest infraction. Can't get the car back right on time? Zipcar charges $50 an hour, whether you're five minutes late or 50. Leave the gas tank less than a quarter full? Forget incentives to fill up—you'll be coughing up a $20 fine. Zipcar's Kennedy says the fines are necessary to make members "take responsibility for the cars while they are using them." In an accident? Unless the other driver was at fault, that's a $500 deductible, according to Zipcar's member contract. On its website, Zipcar encourages members with concerns about its insurance to "consult with a licensed agent" to buy insurance—a "solution" that could eliminate much of the financial motivation for car sharing in the first place.
For-profit car sharing isn't the only successful model. City CarShare, a San Francisco Bay Area nonprofit, offers cars starting at around $5 an hour—a rate that's more than competitive with Zipcar. Among other differences, City CarShare allows members to rent in 15-minute increments, insures members up to a million dollars, and buys cars with high fuel efficiency—unlike Zipcar, which prides itself on offering flashy cars like BMWs and convertible Mustangs. "For us, our key service indicator of success isn't how many members we have—it's how many times a car is being used during a day," says Anita Daley, City CarShare's director of membership and outreach. As a for-profit company, it's understandable that Zipcar has adopted a different approach; but it will need more than peppy "green" rhetoric to retain members who want to belong to a community, not just buy into a company.