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Summary:

Zipcar turned its first quarter profit in a decade recently. Zipcar’s CEO, Scott Griffith, answers questions about the future of the company and the $10B global car sharing market.

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Zipcar’s CEO, Scott Griffith, has always had a passion for three things: cities, transportation, and technology. And he believes “Zipcar represents the most important innovation in transportation in a generation.” A bold claim, but the company has been a leader in the movement of collaborative consumption, or using the web to share “stuff.”

According to Griffith, every Zipcar replaces 15 to 20 personal cars. “So just by growing the business we are having a substantial economic and environmental impact,” he says.

Further supporting Griffith’s belief in the potential of car sharing, Zipcar turned its first quarter profit in a decade recently.

Below Griffith answers questions about the future of the company and the car sharing market.

How do you convince people in the U.S. to give up their cars and switch to a car sharing program?

We see our greatest competition as personal car ownership and the American dream of a car in every garage. This has been inextricably tied to the American dream for almost 100 years. But that marketing home run has had some dire consequences —  environmental and economic. According to the U.S. Census, Americans spend an average of 19 percent of household income on cars that sit idle most of the time. The dream has turned into a nightmare for many, particularly for those living in congested cities, where a parking spot alone can cost hundreds of dollars each month on top of car payments, insurance, and repairs.

Based on member surveys, we know that Zipcar households spend only six percent of income on transportation. About half of Zipcar members sell a car or choose not to buy a car as a result of their Zipcar membership. That makes urban life more affordable for many, many people. For our more than 650,000 members, the value proposition is loud and clear.

Why do you think the Millennials are more open to alternatives to personal car ownership?

Age matters when it comes to cars. We’ve conducted two years of research on the attitudes of Millennials (18-34 year olds) toward transportation, and we’ve found that access is more important that ownership when it comes to transportation and car ownership.

There are three factors at play here: the economy, technology, and social networks. First, the economic downturn has been particularly hard on Millennials, who entered the workforce at a time when the economy was in its doldrums and continues to be stagnant. They have been hit hard by unemployment and under-employment. They just can’t afford to own a car.

Second, this is an “always on” connected generation that has grown up buying music by the song, so paying for a car by the hour is not a crazy idea. Furthermore, they tend to place more emphasis on the type of mobile device they carry, over the type of car they would drive.

Third, this generation has other ways to socialize. They can be “present” without being in the same place, thanks to Facebook, foursquare, Twitter, text, and other forms of communication that just didn’t exist 5 to 10 years ago. Our Millennials survey shows that this group is substituting trips on the asphalt highway for trips on the information superhighway.

All told, you have a generation of smart, collaborative consumers who know the value of access versus ownership, are open to new ideas, and have ways to socialize without getting behind the wheel.

What does Zipcar’s success say about the future of transportation and car ownership in the U.S.?

The future of transportation and car ownership is changing now and will continue to change. We are faced with increasing energy costs, an aging transportation infrastructure, increased population growth in our cities and an increase in the use of mobile technology. All of these factors will continue to generate greater awareness for alternatives to personal car ownership.

This is a profound change for planners and policy makers. It’s time for policy makers – particularly those in DC – to accept that our youngest generation and future generations are not going to think about transportation the way we have for the last hundred years. Unfortunately, federal policy makers haven’t caught up yet. Many of them are still thinking about housing, land use, highways, bridges, and taxing gasoline like it’s 1971 not 2011. It’s time to build a bigger tent – we need to spin up a discussion on mobility policy, moving way beyond the silo of “highway” policy that drives most if not all of the discussion now.

Have you faced any resistance from city or state governments?

In terms of city and state governments, we’ve found that the civic and economic benefits of Zipcar are quite clear. We also help local city and state governments to save money on their own fleets. We have struck deals with the New York Department of Transportation as well as the city of Chicago, the state of Illinois and we even signed an agreement with the Federal Government (GSA) to offer car sharing to federal entities. Zipcar also provides a range of car sharing and FastFleet technology services to a variety of additional city, county and state government entities including the cities of Philadelphia, Pittsburgh, Seattle, Sacramento, Portland, Oregon, Cambridge, Massachusetts, and Wilmington, Delaware, as well as to the county of Santa Cruz.

City and state governments can really accelerate the growth of car sharing through smart policies. Given the proven economic, social, and environmental benefits of car sharing, more and more of them are looking at car sharing as a cost effective tool for congestion management, emissions reduction and parking demand management. Most of the policy makers I meet are fully supportive of car sharing, but it will take time. Even in the face of difficult economic headwinds when the public is looking for bold leadership, the wheels of government sometimes move at a frustratingly slow pace.

What factors do you take into consideration before deciding to bring Zipcar to a city? 

We look at three key factors. The first is high population density, the second is a strong public transportation infrastructure, and the third is expensive and hard to find parking. We have operations in our nation’s three largest cities – New York, Los Angeles and Chicago — but we also have presence in smaller U.S. cities such as Providence, Rhode Island and Sacramento, California. A strong public transit structure is key since it enables our users to augment their transportation needs through a variety of resources Zipcar, trains, buses, biking, etc.

As Zipcar has reached scale, the economics and efficiencies of the model have changed, allowing us to be successful in smaller markets. This was not possible in the earlier days of Zipcar, and one of the main reasons we looked to private, and eventually public, capital. With scale, experience and knowledge comes opportunities to serve places where the model might not otherwise have worked.

What are some of the biggest challenges you face in growing the company? 

Our biggest challenges right now are focused on how we extend the model globally. We see tremendous potential for growth. Globally, car sharing is estimated to be a $10B business annually. Frost & Sullivan has projected a $5 billion market in the E.U. alone. The pie is even larger when you consider Asia. We need to make sure that, as we evolve the brand, we think and act like a global company. We’re working on that right now.

Where do you plan to expand to next?

Growth in Europe and Asia is critical to our growth. Last December, we acquired Streetcar, the largest car sharing provider in the UK, and last month we finalized the integration of the two brands. Zipcar is the largest car sharing provider in the U.K. and we are looking to expand in continental Europe. We will be looking at similar criteria in Europe as we seek to expand.

It’s worth noting that we own a minority stake in Spain’s largest car sharing company, Avancar. That may also be an opportunity for further expansion in the E.U. in the medium term.

In some ways, Zipcar seems like an easier sell in Europe and Asia. What are some of the particular cultural and governmental challenges you face in international markets?

I think it’s fair to say that most Europeans are more accustomed to the so-called “sharing economy” than most Americans. Many European cities have highly sophisticated and efficient rail lines that get people in and around cities and are networked to other cities in Europe. Because of this, the high cost of gas, and extremely limited parking, there is less dependence on personal car ownership.

So from that point of view, Zipcar could be an easier sell. We also see early popularity of major bike sharing programs, the implementation of congestion charges as well as other policy and structural initiatives in the E.U. that are likely to be tailwinds for car sharing adoption.

In Asia, along with the explosive growth of cities, governments have done an outstanding job of building intricate, new rail lines. In some Asian cities, car sharing will become a necessity. You just can’t have one car per household when you have cities like Shanghai with a population of 23 million. In addition, the adoption of mobile/wireless technologies and smart devices is huge in Asia, and consumers there are very comfortable with using apps designed to make their lives more efficient and fun.

The globe is urbanizing. About half of the world’s population lives in cities now and that’s projected to increase dramatically over the next 20 years. This is a global trend that help increase the adoption of car sharing and other smart mobility services.

What is Zipcar doing to stay ahead of Hertz on Demand and other car sharing companies?

We created the car-sharing category here in the U.S., and we continue to innovate the entire value chain, from developing award-winning websites and interfaces, to creating game-changing enhancements like two-way text, iPhone, Android and Facebook applications, to working with auto manufacturers like Ford and Toyota to more closely integrate their vehicles into the space. We have more cars and more members in more places around the world, and we’re continuing to grow and invest in growth.

Do you plan to add more EVs to your fleet? 

We continue to evaluate EVs. We have taken a very thoughtful and deliberate approach to looking at how EVs would work within the Zipcar car sharing model because user experience is key to our value proposition. Zipsters need to know that the vehicle they’ve reserved has adequate charge for their trip, and/or that there are numerous convenient options for charging within the radius of their trip.

Right now, the broader network of charging stations continues to expand and the charging technology itself continues to improve, both of which bode well for the long term success of EVs in car sharing programs. Earlier this year, we piloted a test of the Toyota Prius PHV in ortland, Oregon, Boston, and San Francisco, and we continue to gather intelligence and learnings from those pilots.

What do you think the next big trends in environmentally-conscious transportation will be?

I think we will continue to see a rise in collaborative consumption and a growing awareness for how these new economic models save people money, are more sustainable and efficient. We hope that Zipcar can continue to lead the way here in the U.S. and globally.

We’re really excited about the success of our partner Zimride, which is leading the way in ridesharing, as well as the advances in smart parking technologies that help reduce the time spent searching for parking, as well as the continued rise in popularity of bike sharing programs.

Is Zipcar helping make the U.S. a fitter nation?

I certainly think so. We have data to prove that if you’re a Zipster, you walk more, you bike more, and you use public transit more often than the average car owner. Member surveys indicate a real fact base behind this trend. For the past several years we’ve sponsored a “low car diet” in our major cities. The groups that participate indicate a much smarter and more fit lifestyle.

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