Why is Zipcar not a thing of the past ?

Written by Gwanygha’a Gana and Kummar Gaurav Singh— July 25, 2020

With the rise in popularity of car sharing apps like Uber and Lyft, the utility of food and grocery delivered at your doorstep during the ongoing pandemic and the never-ending buzz around autonomous vehicles, it begs the question; why is Zipcar still around and what does the future hold for it?

Zipcar offers on-demand car sharing. As a member, you can book a car by the hour or day to go where you want when you want. Zipcar covers the cost of gas, secondary insurance, parking and maintenance. The fleet comes in all sizes and includes compact sedans, SUVs, spacious vans and much more. There are three kinds of membership for Zipcar; Monthly, Annual and Weekday.

• Monthly membership is a $7 per month option which gets you driving rates from $8.50/hr and $76.75/day.
• Annual membership is a $70 per year option which gets you driving rates from $8.50/hr and $76.75/day.
• Weekday membership starts at $249 per month. You get a car to use during the week. (isn’t that cool!)

From it’s $1B valuation in 2011 to it’s ~$500M sale to Avis in 2013, the diverse car sharing options provided by Zipcar have allowed it to be a transportation option for users around the world. In order to complement its car rental business, Avis ponied up $500M to acquire Zipcar which is now part of the Avis Budget group.

The rise of ride hailing apps like Uber and Lyft have transformed the car-sharing industry for good. Today most riders use these ride hailing apps to move around in a quick and efficient manner without having to worry about returning a car to its parking spot. While this has affected Zipcar’s business, there are situations where the Zipcar model still makes sense.

Scenario 1 — Airport ride

Let’s take an example of a user located in Seattle who needs to run errands for 90 mins e.g. pick up a friend from the airport and pick up dinner on the way back.

For these kinds of trips where the user does a round trip and needs to return to it’s base location within a few hours, renting a Zipcar makes economic sense over an Uber or Lyft. However, if there is a prolonged stop which stretches the time to 3–4 hrs, the economics start to change. One can argue that given unpredictable post-landing times (like baggage retrieval) or even arrival/departure times for most delayed major airports such as Chicago, it’s not always easy to optimize the 90 minutes Zipcar booking window. However, in such scenarios, the added flexibility of adding time to the current trip at a prorated basis makes Zipcar still worth trying.

Scenario 2 — Airport ride with stop

In this case (airport ride with stop), the cost of rideshare and Zipcar are much closer to the point where an extra hour with Zipcar may cause the user to go with the rideshare option for more flexibility.

There are other scenarios which still exist where the services Zipcar’s do offer, make it a very suitable and flexible option such as moving using Zipcar vans and Road trips.

Scenario 3 — Daily commuters

Let’s analyse a user who uses rideshare to and from work every week day (assuming a 10 min, 3 mile, shared rideshare or regular rideshare) , which in Seattle could cost approximately $7-$12 depending on the time and other factors. (Excluding time of day, traffic/surge for complexity)

In this situation, a rider who uses a shared rideshare option stands to save over the weekly Zipcar option. Riders who prefer to be alone in their cars are better off using the weekly rental option from Zipcar. Note — additional complexities around parking could sway riders to go one way or the other.

If the price of rideshare were to go down by 30–40% then the Zipcar weekly rental business does not remain viable. However, the flexibility they provide users who are running errands and might need car space to do that still gives these user a reason to use Zipcar.

Cheap rideshares are going to be things of the past as the prices are on an upward trajectory, which is good news for Zipcar. The COVID19 pandemic has affected rideshare companies and Zipcar. However, the rise of grocery delivery services as well as its consolidation with rideshare (see Uber-Postmates deal) can have some interesting consequences. This could lead to vertical integration and massive network effects which might cannibalize Zipcar’s revenue. Add into the mix delivery robots (Nuro, Refraction.AI or prime scout) and autonomous vehicles/robotaxies significantly reducing the rideshare/delivery costs, and you have serious challengers to the attractiveness of Zipcar.

Given it’s value proposition to consumers and to city governments, Zipcar is here to stay in the short term. It’s long term viability still remains in question if rideshare costs go down.