Why Zipcar Got Into the Fleet Biz

It’s been around for a decade, but Zipcar, the country’s largest car-sharing company, didn’t start to hit its stride until about two years ago, when it began focusing on college campuses around the country in the hopes of keeping students on as subscribers once they graduate and move to the big city.

The strategy seems to have been a good one for the venture capital and angel-backed startup, which now has 275,000 members in more than 25 states and provinces across North America. So what’s Zipcar doing getting into the rather unhip business of government and private fleet management, a move the company announced this week?

Trying to turn a profit.

Zipcar undercut traditional rental car services by doing away with a lot of the brick-and-mortar presence and human interface, but it remained rooted in the clunky, costly world of actual cars. With FastFleet, Zipcar’s new fleet service, the company is taking the physical car (and many of the associated costs) out of the equation. The idea is to have a product that it can scale up with minimal additional cost. “Big chunks of cost come out of the business model,” said Luke Schneider, Zipcar’s Chief Technology Officer.

It’s a basic software-as-service model, in which a provider typically licenses an application to customers for use as a service on demand. For a monthly fee, Zipcar is providing fleet customers with a reservation and management system adapted from the software it uses to manage its own national fleet, and integrates it with fleet operators accounting and other systems.

Even without the vehicles, however, there’s some essential hardware, notably the “black box” devices (a custom circuit board, processor and modem) that are installed on vehicle wind shields and allow users to unlock the car they’ve reserved. The devices receive 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. The devices also allow Zipcar — and now fleet managers — to remotely monitor vehicles, including the number of miles driven, the time the car was used, how well the engine is running, how much gas is in the tank, and in the case of plug-in cars (which have a growing presence in public fleets), battery voltage levels.

All of this data is sent to Zipcar’s servers over AT&T’s network. Fleet managers can analyze it and figure out where to shift their vehicles based on seasonal or daily demand, rather than maintaining a parking lot full of cars used only occasionally by one or a few employees.

In Washington, D.C., where Zipcar has piloted the FastFleet program, the city pays Zipcar a one-time fee of $1,200 a car to install the devices and then $115 per vehicle each subsequent month to maintain them. Savings offset the new costs, according to city officials. As the Washington Post reports, the program has saved D.C. some $300,000 since it launched in October.

For cities, Zipcar’s reservation system can also offer a surprising bonus. Since it logs who had a particular car during a particular window of time, traffic citations for illegally parked public vehicles can now be routed to the responsible driver. Previously, Schneider said, “Nobody knew who had the car,” and the tickets would go unpaid. In one city, he said the stack of citations for public fleet vehicles amounted to some $10-$15,000.

As Zipcar gets more fleet customers, Schneider said they’ll be able to compare the data collected and “sanitized” with the FastFleet system to identify and adopt best practices in similar organizations. If Zipcar can reap heftier and more predictable revenue while also helping government run more efficiently, then more power to them. According to Zipcar spokesperson Nancy Scott Lyon, the company “expects to cross over into profitability this year.”

This article also appeared on BusinessWeek.com.