Transportation Deployment Casebook/2014/U.S. Carsharing Memberships

Mode Description
Carsharing is a form of car rental in which individuals are able to use a vehicle when needed without the cost or responsibilities of automobile ownership. There are currently a variety of carsharing companies in operation. Each company has a unique approach to the concept of carsharing, but there are some common themes throughout. In most instances, cars of various sizes are kept parked at locations that are evenly disbursed throughout an urban area. Individuals looking to use a vehicle then have the ability to make a reservation that will ensure the car is available for them at the time they need it. These reservations are typically made through an online application, website, or a toll-free phone number. Once a reservation has been confirmed, the user must reach the location of the vehicle. In most instances, this is done either by walking or using public transit, depending on the distance that needs to be covered.

In order to have the ability to access a carsharing service, individuals must possess a membership. This is obtained through submitting personal information along with a sign-up fee to the desired carsharing company. These fees can be a required one-time, or they can be required annually, depending on the service. Once information is verified, individuals become members and receive a form of identification or key that allows them to access vehicles they wish to use. The form of identification or key varies from company to company. Some examples include access cards, key fobs, or standard automobile keys. Becoming a member with a carsharing company also comes with several other benefits. These benefits relieve members of what are considered the largest inconveniences associated with owning an automobile. This includes expenses such as gas, insurance, and maintenance.

When a customer has taken all of the required actions, and they decide to make a trip using a carsharing service, they simply arrive at the vehicle and begin their journey. Most carsharing companies in the United States charge customers for their vehicle use according to the length of time that the vehicle is used. These rates can be charged by the minute, hour, or day. Some examples of pricing structures in the US include Car2Go’s rates of $0.41 per minute, $14.99 per hour, and $84.99 per day. Zipcar has a similar pricing structure, although it varies by day of the week and vehicle choice. Their standard rates are $7.50 per hour and $69 per day. The variation is prices is a result of the characteristics of each company. For example, Car2Go users pay higher fees for the convenience of being able to pick at drop off cars anywhere they like. Zipcar also has many advantages such as the variety in automobiles that members can choose from.

The Scene
Prior to the massive carsharing rollout that has taken place in the United States over the past 15 years, carsharing was almost exclusive to Europe. The earliest carshare program dates back to 1948 in Zurich, Switzerland. The Zurich example was done on a very limited scale. The first examples of continued growth in carsharing did not come about until the 1980s and 90s. During this period, carsharing growth occurred in Switzerland and Germany, and also on a small scale in the United States. By 1999, here were four carsharing organizations operating in the United States. These were located in San Francisco, Chicago, Portland, and Boulder.

Given the slow adoption of carsharing in the United States, individuals had very few options when it came to mobility. Transit is a logical option, but it only allows people to reach certain destinations on certain schedules. There are also limitations when someone needs to transport large cargo. Prior to carsharing, the only options for an individual who wanted to freely move about was to own a personal automobile, or use a traditional rental agency. There are significant downsides to both of these options in regards to cost. Along with the large upfront cost associated with purchasing a vehicle, there are other fees that must be paid on a frequent basis. These include fuel, insurance, and maintenance. A typical automobile will cost a family almost $5,000. Through carsharing, families are able to cut out excess trips and save large sums of money through only using a carshare service for necessary trips. Traditional rental agencies are also not a reliable option. This is due to the fee structures that are designed for long-term rentals. Additionally, drivers waste time by having to go to a rental agency office to pick up a car. The combination of these factors helped to facilitate interest in carsharing in the United States.

Invention
The invention of carsharing came about through the realization that individual auto ownership is expensive. Auto owners are continuously concerned about expensive and volatile energy prices that create uncertainty for the future. Also, parking in many of the world’s largest cities is becoming increasing limited and expensive. In addition, the invention carsharing service that we know today was made possible through advanced technologies that are used to support operations. These technologies include automated reservation systems, smart-card vehicle access, and real-time vehicle tracking. The combination of these needs and technologies has resulted in the system of carsharing that exists today in the United States.

In the early stages of carsharing, there were many limitations that affected the experience for users. The lack of internet access was a primary limitation in the early years. This limited the effectiveness of real-time reservation systems. It also limited the exposure that potential users had to the system. It was not possible to determine when or where a car would be available without making a phone call or going to the location that the vehicle was believed to be parked. As access to the internet began to increase, users were able to receive real-time information about the system. This lead to the access-cards and smartphone technology that is in place today and resulted in the rapid expansion of carsharing in the United States. Users are simply able to locate and book a car with their phone. Once they arrive at the location, the car is unlocked by holding the membership card to the car’s card reader, which is typically located on the car’s windshield.

Early Market Development
The early stages of carsharing development in the United States began with a series of short-term experimentation periods that had specified beginning and ending dates. These were aimed at exhibiting carsharing operations and technologies to the public in order to popularize potential systems. At this time, when a new market was entered, it common to provide the public with a series of demonstrations. These were used to show individuals the basics of the system and how it worked. The other purpose was to demonstrate the many positive benefits that come along with carsharing memberships. As these systems popularized, it was not uncommon for short term systems to be replaced with permanent carsharing services.

Additionally, early development took place in several niche markets. These markets tended to be located in urban environments. They were also thought to be locations that held strong views about environmental and social concerns. It was also important to focus on innovative cities. These places would be more likely to dispose of their current technologies and quickly adapt to a new and promising technologies. As a result, cities like San Francisco, Portland, Washington D.C., and Austin were among the earliest adopters of carsharing in the United States.

There are also specific individuals that early carsharing targeted. These individuals met a number of characteristics related to demographics, travel behavior, and shared attitudes. These characteristics are as follows

•Demographic characteristics: •Travel behavior: •Shared attitudes:
 * Highly educated,
 * Middle to upper income but still cost-sensitive,
 * From smaller households (one or two persons), and
 * Generally in their 30s or 40s (although this can vary greatly by specific location and other service attributes).
 * Not high-mileage drivers and
 * Need to make several trips per month for which an auto would be the preferred mode.
 * Highly concerned about environmental and social issues,
 * Consider themselves to be innovators,
 * Do not like the hassles or expenses associated with auto ownership,
 * More interested in the pragmatic aspects of what a vehicle can be used for and less interested in brand-name attributes, and
 * Sensitive to transportation costs.

The Role of Policy in Birthing Phase
Throughout the birthing phase of carsharing in the United States, several policies were used to help facilitate growth. The most common were start-up funding and parking benefits. Given the high cost of entry into carsharing, funding is a very important tool that can be used to aid organizations. This source of funding typically comes from public sources. This is a result of the popular option that carsharing is in the interest of mitigating transportation related problems such as pollution, congestion, and parking shortages. Additionally, carsharing has received funding in the interest of expanding the mobility options that are available to the poor. Parking benefits were also among the early policies that were used to foster the carsharing industry. Due to the lack of parking in severely congested areas, these benefits were significant. 73% of the early carshare organizations reported that they received some form of parking subsidy. 60% obtained parking from public entities, 33 from private entities, and 20% from both public and private sources. These parking benefits were most often linked to residential complexes, commercial sites, and business partners. All of which received some form of direct benefit from access to carsharing vehicles. During the early stages of carsharing, policies related to funding and parking were locked in, and they continue to play an important role in carsharing today.

The Growth of the Mode
Based on the data that has been used for the quantitative analysis, the growth phase for carsharing in the United States began at some point during 2007, when total carsharing memberships surpassed 125,000. During the growth phase, memberships began to increase at a rapid rate. This is the result of many existing companies expanding their service, as well as new companies entering the market. The leading company in this trend it Zipcar. They were able to increase their North American membership from 210,000 in 2008 to over 515,000 by mid 2011. Zipcar’s success did not go unnoticed. Many traditional car rental companies began offering carsharing services like Connect by Hertz, Enterprise’s WeCar, and UHaul’s UCarShare. This also led to one of the nation’s largest carsharing providers, Car2go, entrance into the market. Car2go was launched by German carmaker Daimler. This increase in large corporations has put some stress on many of the smaller non-profit organizations that were among carsharing’s first adapters, although both business models have been able to coexist comfortably due to the rapidly growing demand for carsharing in urban areas.

During the growth period, parking policies have continued to be a concern for carsharing operators. The Car2go rollout that took place in Brooklyn in October 2014 is a primary example. While there have previously been many carshare options in Brooklyn, they have all secured off-street parking at their own expense. When Car2go disbursed 400 cars on the streets of Brooklyn, many residents were not pleased. In addition to taking away 400 parking spaces, residents have argued that the cars will result in more congestion. What becomes of the arguments over lost parking and increased congestion will certainly play out as the growth period continues.

By January 2013, there were already 24 carsharing services with 800,000 members in the United States. This has led to many of the providers trying to differentiate themselves. Zipcar, for example, has tried to portray itself as a good choice for the young and hip crowd. They have promoted their service through hashtags and have increased the number of cars they provide around university campuses. Additionally, Enterprise CarShare, has continued Enterprise’s tradition of catering to businesses and business professionals.

Development during the Mature Phase
The mature phase of carsharing memberships in the United States has not yet begun. It has been projected that it will not begin until 1,125,000 of the predicted 1,250,000 memberships are reached. The data that is available predicts that this will occur at some point during 2015. When this point of the lifecycle is achieved, carsharing will have become a more significant portion of the automobile mode share. This may result in several policy implications as people begin to rid themselves of owning an automobile and opt for carsharing as a replacement. In addition to Daimler’s Car2go, it is anticipated that many other automobile manufacturers will begin entering the carsharing industry. This will likely occur for many reasons, but by the time the life cycle has reached maturity, there will be few profits to be made for new entrants into the market.

Quantitative Analysis
The data that was used for the quantitative analysis was obtained from the Transportation Sustainability Research Center at University of California, Berkeley, in their Summer 2013 Innovative Mobility Carsharing Outlook. In order to analyze the lifecycle of carsharing in the United States, memberships were used as a metric. This provided an appropriate number that relates that the extent of the carsharing industry. Given that as carsharing as a whole increases, memberships increase at a comparable rate. Using this data, a projected life cycle was established using the equation S(t) = K/[1+exp(-b(t-t_o)]

Using a regression model that provided the best fit, a saturation level of 1,250,000 memberships was determined. Using this value along with other regression results, the projected life-cycle curve was established by using the above equation. This provided the graph below that indicates the actual and predicted number of memberships between 2002 and 2012. Applying the 10% birth and 90% maturity rule to K value, this formula indicates that the birth phase will end in 2007 and the maturity phase will begin in 2015.
 * S(t) is the status measure (number of members)
 * t is time (years)
 * t_o is the inflection point (the year in which 1/2 K is achieved, and the point at which the slope begins to increase at a lesser rate)
 * K is saturation level
 * b is a coefficient that describes the slope of the curve

Conclusion
Through the use of lifecycle analysis, the future growth of carsharing in the United States has been predicted. The results seem to indicate that the mode will enter maturity in 2015. Given that it is now 2014, and the mode has seen consistent growth beyond the years that data was available, it seems that this model may be under estimating the potential growth of carsharing. Due to the complexity of issues that surround carsharing, it is difficult to determine how large the future potential is. Throughout the next decade, close attention will need to be paid to the millennial generation to determine if they will continue to avoid owning a vehicle and instead rely on other modes.