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February 20, 2010

Car Sharing is the Future

CARS - According to new statistics the average city dweller in the future won't own a car, they'll rent or share one for the occasions when they need one.

By 2016 car-sharing programs alone are expected to balloon to 8 times their current 2010 levels, reaching a total of 4.4 million people in North America. The car-share industry is growing very fast, approx. 33% to 50% per year depending on the location.

The reason is an increasing number of young people who don't see cars as a necessity any more. In this era of savvy urbanites with their BlackBerries, iPhones and pay-by-the-minute billing renting a car by the hour just makes more sense to them.

The car-sharing industry is even catering to this, making iPhone apps and other programs so that members can easily find the nearest parking lot where they can get a car.

And its incredibly cheaper too. They don't have to worry about insurance, maintenance, oil changes, punctured tires, gasoline prices because its all included in their "per hour" rental fee. There is a surcharge for mileage driven (which covers the price of gasoline), but otherwise its up to the rental company to make sure the car is filled to the brim with fuel and in perfect working order. You also don't have to worry about parking spot prices in your condo or apartment building, which alone can be hundreds of dollars per month.

Its also practical too. You can rent a Mini Cooper for the day to go shopping, or you can rent a truck for when you need to go to the lumber yard. Or a SUV for your camping trip.

According to automotive research analyst David Zhao its sending ripple effects through the automotive industry. The growth of the car-sharing industry will mean over a million less cars will be on the road in Canada & the United States by 2016 because more people will be sharing a significantly smaller fleet of cars

Zhao published a report in January 2010 which explains how the car-sharing industry has a multiplying effect, wherein people see cars like AutoShare and ZipCar on the road and they say "Hey, I could just rent one instead." It creates a loop effect that advertises itself through cars on the street and word-of-mouth and people who weigh their options are increasingly picking the car-sharing option.

Its ideal for university and college students on a tight budget and even after they graduate they keep using the service because they've realized how convenient, easy and cheap it is compared to buying their own car and having to pay for all the insurance/maintenance/fuel costs.

"It's clear the auto industry has to change," says one industry insider. For many, "owning a car just doesn't represent the dream it once did."

In Toronto alone there is 20,000 members of AutoShare and ZipCar, a number which is expected to increase to 160,000 by 2016.

Members pay approx. $5.50 to $9.75 per hour depending on the car and their membership plan and there's also cheaper rates if you want to rent the car over night ($1 per hour). Users say save hundreds to thousands of dollars per year compared to the regular costs of owning a car.

Zipcar is the largest such company in North America, with 350,000 members and a fleet of 6,500 vehicles operating in dozens of North American cities. Its expected to grow to 2.8 million users and 52,000 cars by 2016.

The service is so popular its now considered a perk (like swimming pools, health clubs and on-site dry cleaning) by condo owners and apartment buildings, resulting in the condos negotiating deals to have car-sharing parking spots available in their parking lots. For every car-share spot provided 10 less residents need a parking spot of their own, making more space available for rent.

City councils are in on it too, seeking to reduce downtown congestion, the need for downtown parking spaces and increase their efforts to reduce pollution. Many car-share companies already rent hybrids (and in rare cases electric cars), plus have plans to rent electric or hydrogen cars in the future.

Not owning a car also means people tend to drive a lot less. They don't go for a drive just for fun. They only rent the car when they actually need it. If you already own a car you might as well use it when going to fetch milk from the grocery store, but if the grocery store is a block or two away and you don't own a car its more practical to just walk there and back.

Paying by the hour makes every trip a financial calculation. Users consider their other options and only choose the car when they really need it.

Even traditional car rental companies like Hertz and Enterprise is getting into the car sharing industry, offering hourly rates in some regions instead of daily.

The automotive industry is experimenting in the market too. In Europe Daimler has launched a program called Car2Go and has since expanded the program to Austin, Texas to test how successful it will be in North America.

"If this program works in Texas, it will work anywhere," says a Daimler-Chrysler spokesperson.

Its also a turning point for the electric car niche industry, because it means cars dropped off at charging locations can recharge while they wait for the next member to pick it up. Plus since the cars are only driven locally the smaller range of electric cars is less of a problem.

Car-sharing industry insiders are now speculating at how popular this trend will be in the future. Some insiders even wonder if car-sharing might someday outnumber car-owning.

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