Car clubs looking for space to expand

Publication date: 26 May 2009

“Location, location, location”, the estates agents’ mantra, has now become the name of the game for Britain’s car club operators eager to compete in a land grab of the country’s most coveted parking bays.

Westminster Council’s decision to award US market entrant Zipcar an exclusive contract to operate its pay-by-the-hour car rental service helps consolidate the UK position of a company that is already the world’s biggest car club operator, with 275,00 members – mainly concentrated in North America.

It also comes just months after US car rental company Hertz launched into the UK and continental Europe with an aggressive expansion plan to become “the world leader of car sharing by 2011”.

For the time being, though, existing UK incumbent operators appear relaxed about the competition, arguing that rapidly growing demand can accommodate more players, with the main constraint on the market being the availability of suitable parking slots.

Plummeting car demand has been reflected in exponential growth rates from customers keen to use the low-cost alternative.

James Finlayson, chief executive of City Car Club, estimates that membership applications have been rising at an annualised rate of 80 per cent year-on-year over the past 18 months.

It is not just economic necessity or environmental concerns which are driving the market. Consumers are also buying into the benefits of enjoying car use without the burden of ownership.

Mark Norman, Zipcar’s president and chief operating officer, says car clubs offer “wheels when you want them”. And with a wide range of vehicles from Toyota Prius and Mini Cooper to BMW, Zipcar aims to offer the chance to “date a car rather than marry a car”.

But just how far are motorists prepared to go to pick up and drop off their “dates”?

All operators agree that well-lit, busy urban environments, ideally within a 10-minute walk of car club members, are best.

Keith Kelly commercial director of Whizzgo, says his company aims to place vehicles in “well-lit, visible locations”, in part to minimise the risk of vandalism, but also so as to allow the vehicles, which carry Whizzgo’s livery to “advertise themselves”.

While the idea of car sharing is by no means new, the internet, mobile telephony and the development of telematic systems – which allow the remote locking, unlocking and tracking of vehicles – have now made it economical to hire cars for as little as half an hour, he says.

The key strategic issue facing operators is to develop strategies with local councils to maintain a good supply of bays, he adds. But constraints in some markets have also prompted some car club operators to buy or lease privately-owned residential driveways or spaces in car parks to overcome the supply bottleneck.

“It’s all about location, location, location”, says Mr Finlayson. “And there is not an endless supply of these locations.”

London, with its high population density remains the best market for car club operators, according to Andrew Valentine, co-founder of Streetcar, which with its 1,200 vehicles and 55,000 members remains commited to developing the market across Europe.

A leader in London with 800 locations, he argues that the growing visibility of the sector is reinforcing its appeal as an alternative to car ownership – rather than traditional car rental.

Neil Cunningham, UK general manager of Hertz, agrees that car clubs operate in a different market segment to car hire companies, with the convenience of spontaneous booking and attractive locations integral features to the development of its own car club.

“Market conditions in the car rental market are challenging,” he says, suggesting that some of Hertz’s rivals are too preoccupied to take on the car club market.

Hertz though is determined to leverage its fleet purchasing, maintenance and customer database to become a key operator. And City Car Club’s Mr Finlayson believes that car hire companies will emerge as natural trade buyers for some independent car club businesses as their early investors seek to exit.

Source: The Financial Times