Why Car2Go Is The Answer To Poor Mass Transit
- Posted by Leigh Drogen
- on November 1st, 2012
I find myself today back out in San Diego, after leaving only a few days ago supposedly headed back home to NYC with a brief two day stop in Chicago for meetings and some time with friends there. But because of the fact that the NYC airports are literally under water, I won’t be going home until at least Saturday (still not likely).
San Diego certainly isn’t the worst place on earth to get stuck, and it’s nice to spend time with friends here as well as our VP of Engineering Brian Smith.
I’m staying at Brian’s house a few minutes from downtown San Diego in University Heights. A year or so ago Brian (31) and his wife got rid of their second car, they weren’t using it. He told me that maybe he used it 2 or 3 times a month, it just sat in the driveway, a depreciating asset. Brian rides his bike down the hill to our office here in San Diego, his wife drives the car to work.
So they got rid of the other car, and Brian got a Car2Go pass.
Since I don’t have a bike and need to get around a bit I’ve been using his Car2Go pass and I have to say, it’s quite amazing. In the broad arc of collaborative consumption Car2Go seems like the next step on the ladder for car sharing.
Let me explain.
The reason ZipCar is failing is due to the fact that they are really just another rental car service which caters to a specific type of driving. But that type of driving does not solve the problem that most people have, namely the fact that most cities have horrible mass transit options. ZipCar makes you return the car to its point of origin which renders it useless for commuting or traveling short distances to do errands.
The point of collaborative consumption is to unlock the excess capacity in our assets. Did you know that the average car sits idle for over 23 hours a day? That’s not what ZipCar does. As well, ZipCar owns all the cars, so it’s not the people who are benefiting from seeing the capacity utilization in those assets go up, it’s supposedly ZipCar. But as you can see by the looks of ZipCar’s stock, it hasn’t gone well.
On the other end of the spectrum is a car sharing startup called Getaround and its brother RelayRides. Getaround is definitely the future, no doubt about it. Getaround provides a system which allows you, the car owner, to rent out your car to someone very easily. It allows you to increase the capacity utilization of an asset you own, and get paid back in part for owning that asset. Getaround takes a cut of the fee you collect, you set the fee per hour or day or week, whatever.
But Car2Go solves what is probably a more important problem. People do not have good access to mass transit, and they don’t want to be charged for time that they are not actually driving the car. You can’t borrow someone’s car to commute to work, because even though you’re no longer using it, the owner can’t get it. In the case of Car2Go, the company owns the car, but you don’t return it to the lot it came from, you just park it on the street, anywhere.
This is a game changer because it solves the problem of needing the car to go one way, go to work, and then go the other way. And the system works great because during the day many of the cars are parked downtown, in the afternoon those people just walk down the street and pick up the first one they see. At night the cars are located where people live, they walk down their own block to find one and do errands. In the morning the cars are all where the people live, they get in and drive downtown.
The reason this works is because it costs 30 cents a minute to drive the car, then you get out and the meter stops. If the company has done the math correctly, they know exactly how many minutes a day their cars are being used on average, the average number of people who use them per day, and as the capacity utilization of the average car reaches a certain level, they just add another car to the system.
I’m not quite sure how they got over the chicken and egg issue, you need to start with a certain number of people willing to drive, and a certain number of cars so that it is easy to always find a car near you. I have yet to walk for more than 10 minutes to find a car, it’s usually about 2-3 minutes away.
If the company knows it can be profitable on a per car basis after a certain threshold of cars in the system, they should be able to scale profit easily. And everyone wins, because as the company expands there are more cars in the system and the area that you can leave the car without the meter continuing to run gets bigger.
Oh did I mention it’s completely electric and you never have to worry about charging it. As cars circulate through the system they pick them up when they are near the main charging station downtown and charge them.
While building mass transit systems is superior, this is a great intermediate step while our government sits with its thumb up its butt playing retarded politics with the future of the country. I love the way Car2Go works and given that it is a little more expensive on average than a NYC buss fare, I find it pretty amazing.
The only draw back, I laugh every time I get into one because I feel like I’m getting into a clown car.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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