Megan Graff may not be a car owner, but she loves a Honda Accord named "Armson." "I think of it as mine," she says. Armson occupies a parking spot two blocks from her non-subway-accessible Washington, D.C., townhouse, and she uses it a half-dozen times a month to visit her family in nearby Maryland or "to meet up with friends at their obscure location or bring them to my obscure location," says Graff, a 28-year-old grant writer for a classical music organization.
Armson belongs to a fleet of cars owned by Zipcar, a company that has turned the concept of car rental on its head. There's no waiting in line, and there's no spiel on upgrades or insurance. In fact, there's no face-to-face interaction at all. Customers apply to become members—or "zipsters"—and reserve vehicles online.
And forget about getting stuck with a Ford Taurus or Chevy Cobalt. Zipcars, which are scattered throughout city neighborhoods, are fun and whimsical (think Mini Coopers and Volkswagen Jettas with names like "Dagwood" and "Jinglebell"). Car doors unlock with the flash of a pass card over a sensor on the windshield, and a key hangs from the steering column. Gas and insurance are included in an hourly rate, which tends to range from $6 to $10.
Flexing muscle. Run out of a sunny, warehouse-style office in Cambridge, Mass., Zipcar aims to offer urban dwellers "the same freedom and feel of owning a car but without the baggage and without the hassle," says chief executive Scott Griffith, 48, a former Boeing executive who looks more than a little like Apple's Steve Jobs. The company, founded in 1999 by an MIT business school graduate and a Harvard environmental science scholar, today claims 200,000 members in 50 cities and 5,000 vehicles (1,300 of which are in New York City). A huge boost—including five new cities—came late last year, when Zipcar merged with the industry's other major player, Flexcar. "These were similar business models that grew at a relatively slow pace and had to come together and take advantage of the market," says Neil Abrams, an industry consultant.
About two thirds of Zipcar's members are under 35, an age that's been trending up over the past few years. Based on survey data, the company says that more than 40 percent of Zipcar users either sell their car or decide not to buy one. The target market is the 20 million people who currently live within a five- to 10-minute walk of a Zipcar, Griffith says, more than half of whom don't need to drive every day. (Susan Shaheen, who researches transportation trends at the University of California-Berkeley, estimates that there is a market for at least 2 million car sharers in the United States.) "We're barely scratching the surface," says Griffith, who expects the company to reach $100 million in revenue this year, drive toward $1 billion, and eventually launch a public stock offering.
Car free. High gas prices and growing environmental concerns are creating a "perfect storm" that's good for Zipcar, Griffith says. "You've got the double whammy of gas prices and a struggling economy, plus the green component on top of that," he says. Right now, the company is focusing on recruiting more members in the cities it's currently in. It also faces a more intangible hurdle: deeply rooted attitudes about private vehicle ownership. "We're up against 100 years of great marketing from auto manufacturers and the psyche that when you graduate college, one sign that you've 'arrived' is to buy a car," Griffith says.
The company is making a big push to intercept customers early by revving up its presence on college campuses. So far, the service is available at 70 universities, and Griffith says hundreds more are potential hubs for expansion over the next five years. Partnerships with businesses, developers, property managers, and transit agencies are also fueling expansion. Foreign markets are also fair game: The company already operates in Toronto, Vancouver, and London, and Griffith says at least 15 European cities are potential targets for large-scale Zipcar adoption.
Traditional rental-car companies are beginning to eye Zipcar's market. Through its pilot U Car Share program, U-Haul rents white Chrysler PT Cruisers for $10 an hour at limited locations in nine cities. Perhaps a more aggressive competitor is Enterprise, the nation's largest car rental company, which offers hourly rentals in a handful of cities. In January, the company launched WeCar, a car-sharing service for students at Washington University in St. Louis. "It's a natural extension of our business," says public relations manager Lisa Martini.