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Summary:

Four years after setting up a car sharing service in London, England, Zipcar announced today that it has acquired the UK’s largest car sharing provider, Streetcar. Now Zipcar faces some questions about how to bridge technology gaps between different models.

Streetcar founders Andrew Valentine (left) and Brett Akker (right) with Zipcar CEO and Chairman Scott Griffith (center).

Zipcar isn’t the oldest car sharing network, but it is the world’s largest and it aims to eventually span across the globe — partly by acquiring competitors. In Zipcar’s latest move, on Wednesday it announced that it’s acquired the UK’s largest car sharing provider, Streetcar, in a $50 million deal. But now as Zipcar works to integrate Streetcar’s network — and potentially other networks down the road — it will face some important questions about how to bridge technology gaps between different car sharing models, and how to economically scale.

The grand vision behind Zipcar’s global expansion is for a subscriber who lives near the company’s Cambridge, Mass. headquarters, for example, to rent a car in a Barcelona or London Zipcar fleet just as easily as in their home network. That would require a seamless user experience, and will need some heavy lifting behind the scenes. Incorporating new networks like Streetcar’s will force Zipcar to decide which features and services to drop (at the risk of alienating existing users), and which ones to try and adopt or maintain.

Keeping in mind ZipCar’s goals of global domination, profitability in 2010 and an eventual IPO, the strategy comes down to rapidly expanding its fleet and user base at the lowest cost. “We don’t want to go hang a lot of new hardware on the car,” Zipcar CEO Scott Griffith explained to us in an interview last summer.

In fact the ideal vehicle for car sharing, Griffith said, would be modeled after smart phones, with an open platform that would allow Zipcar to roll new cars into its fleet with little more than a software download. Given that ideal, Zipcar seems likely to opt for streamlining its acquisitions and shaving off some of their extra gadgets and services.

Zipcar’s Tech

Zipcar developed its fleet technology with a plan to scale it. The company’s vehicles carry some essential hardware — notably a “black box” device (a custom circuit board, processor and modem) fitted to a vehicle wind shield that allows users to unlock the car they’ve reserved. The device receives data over AT&T’s wireless network and when a user reserves a car (online or over the phone), it authorizes their card for a particular vehicle. Those devices also allow Zipcar — and now fleet managers, through Zipcar’s new FastFleet program — to remotely monitor vehicles.

Streetcar user guideStreetcar runs on a different system. Like Zipcar, it lets users unlock their reserved vehicle with the swipe of a card over the windshield, or by way of an iPhone app. But Streetcar has also taken the step of equipping its vehicles with a hands-free phone for calling the company’s service center, and made it so calls to a driver’s incoming mobile phone can be diverted to the car. Streetcar also requires users to enter their PIN on a handheld terminal or on a keypad in the dash before they can start the car.

A Zipcar spokesperson today told us the company has not decided whether it will continue the hands-free phone service for the Streetcar fleet. But if Zipcar remains focused on keeping costs low as it scales, our guess is that Zipcar will phase this out of the UK fleet. It may not be worth it to alter Streetcar’s existing fleet, but as new cars roll out we’d expect them to use Zipcar’s more streamlined customization process.

Other car sharing networks that Zipcar might consider rolling into its empire in the future have additional hardware and software, too. Avancar, a Barcelona, Spain-based car sharing startup in which Zipcar took a minority stake last year, equips each vehicle in its fleet with a small computer and keypad below the rear-view mirror that allows drivers to make reservation changes and contact customer service reps when they enter a PIN, and which handles the mileage and fueling data (Zipcar has drivers manually enter odometer information at the gas pump).

One Way

Aside from the technology loaded into the vehicle itself, bringing Streetcar’s vehicles — and some 75,000 members — into the fold will also require a bridging of differences in the service model. Streetcar currently offers customers the option to request one-way trips. If users place the request at least 24 hours in advance, they can check out a car near their home, for example, and return it at the airport.

One-way rentals tend to bring inefficiency into the system, according to Ryan Chin, a PhD candidate in the Smart Cities research group at MIT (GigaOM Pro, sub. req’d). That’s primarily as a result of asymmetric trips, with an influx of people trying to go to commercial centers from residential areas around the same time.

Operators can deploy sensor technology and collect real-time data on their fleet, but that doesn’t solve the problem. Chin says the key to mitigating the redistribution issue rests largely on developing a better algorithm that would crawl transit-use data.

Zipcar, by contrast, offers only round-trip bookings — a fact that can eliminate the cost of having to redistribute vehicles until that algorithm’s perfected, but which limits the network’s potential to address the “last mile” gap in many mass transit systems (e.g. getting between the subway station and your final destination).

As Zipcar races to scoop up car sharing networks in its quest for a global presence, much of the hardware and services that are sustainable at relatively small scale could likely fall by the wayside. But Zipcar — which despite its ambitions has not matched Streetcar’s growth rate or size in the UK – could pick up more than just cars and subscribers along the way. If it’s careful not to stamp out too much of the identity of a startup that reportedly came close to breaking even in 2008 on sales of £15 milliondoubled its user base in 2009 and in January predicted that it would reach 250,000 customers by 2012, then Zipcar could also pick up some much needed momentum overseas.

Photo courtesy of Zipcar

Related GigaOM Pro articles (subscription required):

Mobility on Demand Takes Aim at Transit Networks’ “Last Mile”

Location-Based Services: From Mobile to Mobility

Electric Vehicles Give “Mobility as a Service” a Jumpstart

By Josie Garthwaite

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    1. Thanks Kevin

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