Saturday, October 13, 2007

Car Sharing Advice for Cities

(this post was originally written in 2006 for
How can and should a government support the development of Car Sharing Organizations (CSOs)? As I write this, I note that many things revolve around the major cost items of running the business.

1. Car insurance. Insurance is very difficult to obtain in this nascent industry since the insurers have no experience with the risk basis, and it is a major cost to the CSO. It took years of accumulating data to finally get our insurance rates down in line with reality. If the government (city? state?) could establish some kind of pool for just the catastrophic incidents, this is an important way in which insurance risk can be tiered, making insurance affordable.

2. Parking. Parking ranks right up there as one of the largest variable costs. CSOs compete with individual's costs of maintaining and parking their own vehicles. If private parking is available on-street (cheaply), this makes the CSO service relatively more expensive than owning your own car and parking it on-street for free or close to free. Likewise, the convenience of on-street parking can make car-sharing (or private ownership) that much more (less) appealing than the alternative parked deep in large garages. This can swing both ways in supporting or creating an additional hurdle depending on where (and price) of the residential housing stock.

My best advice here is: Offer up some parking spaces (municipal lots or on-street) for one year agreements to whichever car-sharing company wishes to bid on them. In the early years, you will likely have only one company bidding, and their bid will be close to zero $/month. As the business gets more established, and as competition enters the market, the value for specific parking spaces to specific companies will rise: the city will enjoy the additional revenue, and more than one company can compete in specific locations (especially if you can offer up more than one space in a location). This seems like the most fair way to both nurture a budding industry, as well as accommodate success and competition.

3. Marketing. This is very very dear to both starting and existing companies. The city has lots of resources to get the word out to residents at very low cost. Providing this ability, whether the area has one or many competing companies is critical, and keeps the costs of providing the service down. For example, on bus, subway adverts, or information mailed out to residents that renew vehicle registrations, etc. Again, please make sure to offer this service if there is only one company, and quickly accommodate the addition of other competitors as they arise.

4. Taxing, Zoning, Plating, Parking Permits. Zipcar operates in many cities, counties, and states across the US and now Canada (Toronto). Obstacles have included: residentially zoned neighborhoods where the inclusion of a car-share parking space could be construed as "business" and thus not allowable; a business tax applied on each and every parking location as if it were a separate "business establishment"; per transaction taxes meant for car rental that make the economics of hourly rental impossible (i.e. $10/rental tax ... if you rent for just a few hours that makes it economically unreasonable); are these vehicles plated commercial or residential? In Boston, commercial plates pay a higher rate at the toll booths, and get to park in loading zones. We would like to pay residential rates at the tolls and not be allowed to parking in loading zones... In any event, you can imagine how these can cause issues, some of which are easier to resolve than others.

5. Geographic carve-outs. If my memory from 3 years ago serves me, London offered up its support for carsharing on a borough by borough basis (?). I think this is problematic because, like most businesses, carsharing does best when it can scale. Also, users very much stand to gain from competition (improved quality of service) and a large network (i.e. a member can pick up a car from both work or home, without having to join two companies). Again, this is an easy issue to correct going forward."

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