Zipcar is expected to join with rival Flexcar
Deal would extend reach of Cambridge vehicle-sharing firm
Cambridge car-sharing company Zipcar Inc. is expected to disclose today that it will merge with its competitor, Flexcar, giving the company greater geographic reach and a larger fleet of cars as it attempts to persuade people that sharing a vehicle makes as much sense as buying one.
Seven years ago, Zipcar brought its first communal cars onto the street, allowing members to go for joyrides, carpools, or short trips by reserving a car for a few hours instead of buying or renting one. The combined company, which will operate under the Zipcar name, takes transportation timesharing to a new level, with about 180,000 members who will have access to 5,000 vehicles in more than 50 markets in the United States, Europe, and Canada.
"This is really a revolutionizing idea that is growing into an industry really quickly," said Zipcar chief executive Scott Griffith. "We're doing something with this merger that would likely take us years" otherwise. "This is the acceleration of an idea into the mainstream."
Zipcar and Flexcar have similar business models and technology; members go online to reserve a vehicle, use a smartcard to unlock the car, and take their trip. They pay a fee that covers insurance, gas, maintenance, and parking instead of dealing with the hassle themselves.
Both companies were founded within months of each other in 1999, but took root in different geographical markets. Flexcar was founded in Seattle in 1999 and has historically had strong growth on the West Coast, operating today in Seattle, Portland, Ore., San Francisco, Los Angeles, San Diego, Atlanta, Pittsburgh, Philadelphia, and Washington, D.C. Zipcar started in Cambridge and has stationed fleets of its cars in New York, Boston, Washington, D.C., Chicago, San Francisco, Vancouver, Toronto, and London. Combined, they also have operations on 70 college campuses.
"It's a relatively small industry, not something you find around every corner; that's why it makes a whole lot of sense to join companies and merge," said Thilo Koslowski, vice president and lead automotive analyst at Gartner Inc. The main challenge the companies will face is increasing awareness of their service among the general population, he said.
Griffith will continue as chief executive of Zipcar, which will combine the Cambridge company's fleet of 3,500 vehicles in 35 markets with Flexcar's 1,500 cars in 15 markets. Mark Norman, chief executive at Flexcar, will be chief operating officer, and the combined company will have 220 employees.
Car sharing has grown into its own industry, with more than 30 competing car-sharing providers in the United States. But even thousands of communal cars in major metropolitan cities represent a tiny dent in a culture that embraces the convenience of car ownership, with 200 million vehicles on the road in the United States.
Over the next decade, however, the market for car-sharing could explode from its toehold, as a new generation of drivers may be put off by the growing expense of operating a car and the environmental impact of owning their own wheels, Koslowski said.
"The next generation of drivers may have a little bit different view of how to meet basic transportation needs - they may not need to own a vehicle," Koslowski said. While it would require a widespread cultural shift in the way people think about transportation, the membership for such services could grow to a million people over the next decade, he said.
Eventually, Koslowski said car sharing networks might even create new opportunities for car manufacturers, who could develop environmentally friendly cars or hybrids that might be too expensive for an individual to buy but could be sold to companies that embrace ideals like reducing road congestion and carbon dioxide emissions.
Zipcar is generally not profitable until it has been functioning for more than two years in any given market because of costs that include everything from buying the cars to finding parking places, Griffith said. Neither company is profitable overall, and the companies did not disclose the terms of the merger. "We think in total, the market potential of service across all markets in America is 2 million, at least," Griffith said. "We look at the top 15 major metropolitan areas and look at the number of cars owned that need to be used every day - it is actually a minority of cars."
Carolyn Y. Johnson can be reached at firstname.lastname@example.org.