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The “carshare” business (free-floating, short-term rentals) is on the ropes. ReachNow is long gone. Limepod is closing its Seattle operation in December. The survivor, ShareNow (née Car2Go), is pulling out of 5 North American cities including Portland. A few weeks ago, ShareNow rolled out its $4.99 fee to park outside of high-traffic areas, and “up to” $4.99 credit to move it back in, in an effort to cover some costs. It’s enough for some to decide the business model is in a death spiral.

That would be a shame, because carshare has some societal benefits. It changes driving from a large fixed cost to an incremental one, which should discourage driving. It also eliminates one of the main objections to getting rid of a car entirely. So it’d be nice to keep these businesses around or create a public equivalent.

At the moment, we don’t really know if the business model is sustainable, because the current market is shaped by lossmaking “rideshare” providers flooding the market with cheap door-to-door service. As with anything unsustainable, this will one day end and leave one of three equilibria:

  1. Autonomous vehicles never materialize, and Uber/Lyft end up at more or less today’s regular taxi price point. There is plenty of space for carshare and bikeshare companies to be profitable, and regulation (to ensure equity, etc) can probably deny a chunk of those profits while keeping them in business.
  2. Self-driving cars arrive, and some combination of consolidation, deregulation, and patents minimizes competition. At more or less the current price point, investors actually realize their profit dreams. There is a market for carshare and bikeshare, but in a narrow price band that doesn’t allow for much profit.
  3. Self-driving cars arrive and become a commodity. Prices plummet. The carshare companies automate their cars, as the old model is doomed. Transit agencies can give up on coverage routes and focus on high volume corridors where they have traffic separation.

I have no idea how this will shake out — whether carshare and bikeshare will be enormously profitable, marginal, or completely irrelevant. What would be unfortunate however, would be to strangle these services with rules and fees while they are still marginal, creating the narrative that these models “don’t work.” Even if autonomous cars destroy the model, these companies, if they survive, are well-positioned to compete so that the benefits of new technology accrue to consumers rather than distant shareholders.

45 Replies to “ShareNow, regulation, and the future”

  1. “Transit agencies can give up on coverage routes and focus on high volume corridors where they have traffic separation.”

    Or, transit agencies can use smaller vehicles to provide frequent service to low-population under-served areas.

    1. Even if buses were automated, how much would costs really go down? Metro currently estimates each service hour at around $150. Bus drivers get paid around $25/hour. Even if, with benefits, it rounds up to $30, that still leaves $120/hour in operating costs left, which robot bus drivers won’t magically make go away. Plus, all the sensors and self driving equipment, themselves, cost money, and have to be maintained, eroding some of even that savings.

      1. I’m not sure where you get your numbers, but everything I’ve read is that driver costs are by far the most expensive part of operating a bus system. It also creates an expensive feedback loop. In many cases, you can get by with a smaller bus, as long as you run it a lot more often. You would end up with more riders, and thus better fare recovery. But that is a lot more expensive, because you are paying the drivers a lot more.

        On the other hand, if the buses are automated, then service is much cheaper. You would still have some people monitoring the vehicles (remotely) to see if there is a problem. Much of the time, they would then step in, and operate the buses remotely (the way people in the military pilot drones). A smaller fleet is still cheaper to operate, but not hugely so. At that point, smaller buses and vans make sense for many routes. This enables far better service, which then creates the virtuous cycle that is improving transit.

      2. Metro drivers have pretty good benefits. Definitely worth more than $5/hour. Paid vacation (which requires substitute drivers), health benefits, and pensions are quite expensive. FICA taxes alone are a couple bucks an hour. I’d estimate the fully loaded driver cost is closer to $50/hour.

      3. Ross is right. Labor costs are the biggest component of transit operations.

        1. Benefits are more than 20 percent of salary. Most personnel people will tell you it’s 50 percent in private industry and higher for public employment. And that’s just for SS, Medicare, retirement, health insurance, paid sick and vacation and holidays as well as other minor things.

        2. When a driver calls in sick or goes on vacation, a replacement driver has to be paid. Because most people work only 250 days a year, that’s another extra cost of about 10 to 15 percent (and those people also get benefits).

        3. Drivers need breaks and get paid for them. They also get paid for the non-revenue time like driving to and from the yard.

        4. There are supervisors. There are mechanics. There are administrative people. There are planners and data analysts. Those staff also get benefits.

        5. That $25 an hour is low for an average, trained bus driver.

        There are mounds of cost accounting research for transit agencies and most will say that 60 to 70 of the cost can be allocated to hourly labor costs.

      4. Yeah, $5/hr to cover benefits doesn’t sound very realistic.

        I run payroll at my company; employer-paid taxes and benefits total ~50% of our wages. I’m pretty sure bus drivers make closer to $30/hr so add another $15/hr and we might be in the ballpark.

        Also remember that drivers are paid when on the clock even if they aren’t necessarily driving (training, breaks, admin tasks, etc.)

      5. The basic rule of thumb for the fully loaded cost of an employee is to double their pay rate.

        Benefits, managers, office space, uniforms, etc. Obviously this is going to be off but if you don’t collect any specific information to do better this is a reasonable guess.

      6. The total compensation package for bus drivers likely exceeds $25/h. From the perspective of the transit system, the hourly wage is only a portion of the total cost of a driver. Still, I doubt this gets anywhere close to $120/h.

      7. Typically, labor = about 80% of the cost of operating a bus. It’s a rule of thumb that’s been used for years.

      8. Right, but how much of the labor is the bus driver vs. maintenance staff. Automating the buses eliminates the bus driver, but not the maintenance staff. You’d also have to hire more fare enforcement officers, further negating some of the savings.

        I’m not saying buses going driverless won’t save anything. It will. Just not as much as many people think.

      9. 1 driver/moving bus. Maintenance and fare enforcement staff will increase, but their work spreads out fleet wide; they are not going to average out to 1 per bus.

  2. Even before Car2Go, the concept of rental cars have existed for a long time, and will continue to exist afterwards. However, Car2Go achieves a level of convenience that the other services, including Zipcar, have so far failed to match. It is a huge deal to be able to just walk a couple of blocks, hop in the car, and drive, without the overhead of having to walk or bus for half an hour to get to where the car is.

    However, in order for the business model of scattering cars all over the city to be sustainable, just relying on carless individuals making out of town road trips isn’t enough, since most of those trips will occur on weekends and holidays, leaving most of the cars just sitting there idle during the weekdays. To get weekday usage, they need another pricing model that makes ordinary commuting on them somewhat affordable, at least for occasional use by people who are in a hurry. Hence, the free-floating service and pay-by-the-minute short-term rates. To a large extent, Lyft and Uber have undercut that short-term car rental business. Why rent a car for half an hour, and have to search for parking, when you have have Lyft or Uber drive you for essentially the same price? Without good profits from short-term rentals, this leaves the company more reliant on long-term rentals, which means that, to stay afloat, weekends and holidays have to generate enough profits to cover the entire rest of the week.

    1. Yeah, the model never made that much sense to me. In order to be successful, you need to have cars everywhere. This means people everywhere. In cities like that, you typically have decent transit. So the hope is that you are in the middle somewhere — where transit isn’t that good, but there are still lots of people. At the same time, why don’t people just buy a car? The assumption is that transit works for many trips, just not all of them. So now the window is even smaller — transit has to be good, just not really good. Good enough for commuting, but not good enough for that trip you want to take with the car. You also have to hope that parking is easy. As you said, when it isn’t, taking a cab is much easier. Which is the other thing, you have to hope that cab service is poor, or very expensive. This again runs against the population density model again. If you have enough demand for a car share system to work, you probably have a very good taxicab system. Oh, and the folks who are your customers also have to have a drivers license, and be sober when they use the car.

      It basically makes sense for when you need to pick up something large — something that won’t fit on the bus. It is rare that a company won’t deliver that for you — often at no charge.

      This is different than bike share. Bike share works because small trips are very fast with a bike, and because parking them takes up very little space. Good bike share systems have docks at just about every block. Doing that with a car share system would be extremely difficult. For many trips, riding a bike is faster. A bike lane doesn’t encounter as much congestion (again, because bikes use less space). Stand on Stone Way, next to the Burke Gilman on a sunny summer evening, and you can see this dynamic at work. When the light is read, dozens of bikes all line up, ready to cross. The light turns green, and they all get across. Every one. Yet there are cars lined up all the way to the Fremont Bridge, and those towards the end are simply out of luck. They can’t cross the intersection fast enough, because they are lined up, one by one. They have to wait another light cycle.

      Nothing said in this post has changed in the least:

    2. YMMV, but my experience has been that a Zipcar is not really much further away than the nearest Car2Go, and I could always depend on it being at the same location. This was the case for me in South Beach, Miami and the ID in Seattle. With this and the parking uncertainty, I ended up using Zipcar most of the time (mostly for groceries and bulky items off of LetGo, errands at odd locations, and house hunting). Car2Go could be useful for one-way trips especially when I don’t know how long I will be out, but I tended to do transit both ways or transit one way, Uber/Lyft on the way back for those trips. Looking back, the only time I was using Car2Go regularly was when they cut the price by half for a short time in Miami. Obviously, that wasn’t sustainable, and they eventually pulled out of Miami entirely leaving just Zipcar.

    3. My company uses zip car as a fleet, and it’s so convenient. No reimbursement, it’s charged directly to the company card, and we don’t rely on employees having a car. I’m taking one to Olympia tomorrow, and I even do longer trips where you might get a traditional rental. So that’s a great weekday market that could grow a lot if people expected it of their employer.

  3. I remain skeptical of the Durkan proposal to put fees on Uber and Lyft because of the market uncertainty of even those companies. No one is going to find the revenue stream predictable enough to underwrite bonds for capital projects like the CCC either.

  4. Of all the vandalism accumulated by the Downtown Seattle Transit Tunnel since its opening in 1990 – damn, that is 29 years, isn’t it- thanks for showing us the ugliest. At least I hope it’s still got the title.

    Is everything flat and polished in there for sale now? Time was, that pedestrian tunnel would’ve been considered part of the arts project. Used to enjoy just walking it. ‘Course same used to hold for Seattle.

    My last taxicab ride, about a week ago, was a twenty-minute drive across Olympia in a spotless and good-smelling Toyota Camry hybrid car, driven by a young man faultless as both a driver and a person. Hope his replacement by a mechanism takes a very long time to happen.

    Mark Dublin

  5. When my parents used to borrow my car for the summer (they spent their summers in Vancouver, BC), I used to use conventional rent-a-cars on the weekends (while doing my normal bus to work on the weekdays). Those car-2-go Smart cars were a godsend when I needed a car for a one way weekday trip– I still don’t know why they moved from cheap cars (and if not Smart cars, they could have gotten a fleet of cheap Chevy Sparks or Sonics) to more expensive (both in price and maintenance) luxury cars.

  6. Car share needs to die a swift death. It was never going to be sustainable. Having cars parked all over the city just waiting is a waste of space and resources. We want driving to be a large fixed cost, not an incremental one. We need to actively discourage motor vehicle use for the sake of the planet and future generations. Incremental payments encourage car use. That’s the last thing we need.

    Let this bad, environmentally damaging experiment die already. For everybody’s sake.

    1. Its impacts are mixed. Hopefully the car stays parked for 30 minutes or less and then somebody else takes it. The concerns about it being parked for hours or days are in outlying single-family areas, not in the inner city where parking is scarce. If it costs several dollars an hour, people won’t be able to use it every day unless they’re rich. The problem with wanting driving to be a large fixed cost that most people already have cars, and they drive them excessively because the fixed cost is sunk, and they often don’t have a clear understanding of how much the car is costing them per year. So people’s default choice is to keep the car and we want them to ditch the car. The only way to get them to ditch the car is to convince them there are sufficient alternatives. Carshare is one of those alternatives, and shouldn’t be dismissed out of hand. The most important thing is to get people to own fewer cars, and then that argument that “the fixed costs are sunk, the incremental cost is low, and I underestimate the total cost” goes away.

      1. I strongly disagree. First of all, unless the car sharing company is paying people to move them, these cars are likely idle for most of the evening. Say 7 pm, after the evening rush, and 7 am, before the morning rush. That’s a lot of time sitting there just parked. Sure, you’ll have one or two users during that time. Not many though.

        Look around you. There are no sufficient alternatives that appease most people. Even free taxis/Uber/Lyft wouldn’t get people out of their personal cars. We have just entered the Necrocene Era because we refuse to stop making greenhouse gasses.

        Seattle will look like San Jose before carshare begins to make an environmental impact. That’s the simple truth, and I for one find it unacceptable and want to do something about it, not just pretend it isn’t happening.

      2. As the article rightly points out, models that make drivers pay the full cost of driving on a per-trip basis do discourage driving. I imagine that for most readers of this blog, the underlying motive in advocating car sharing is just that: reduce VMT. So in a way, trying to sell car sharing to a car owner as a “sufficient alternative” is a bit disingenuous, because what you’re really after is for them to drive less, not just to swap out their vehicle for a car share vehicle and rack up just as many VMT as they did before.

        When I was a non-car-owning person for several years, I opted to not take trips because it seemed so expensive, and I convinced myself many times that it just wasn’t worth it. Thing is, I finally realized this was happening, and I realized that I actually didn’t want to face the full cost of driving every single time I wanted to take a trip (because time and time again, I didn’t take it). I didn’t want that to get in the way of living life. So I became a car owner again. And now I pop up to Bellingham and down to Tacoma with my pets to see family more often, I go camping and hiking more, and it’s much more enjoyable to see friends cross-town in what would otherwise be 60+ minute transit trips each way — on a good day. More enjoyable because how much it’s costing me doesn’t smack me in the face every time I do it. Even if owning a car is more expensive than taking all those trips with zipcar and/or car2go, it’s worth it to me because I’m actually doing stuff.

        I imagine some people will say that this is just a trick of the brain and that I should have “gotten over it” and just taken all those trips (when I was a non-car-owner). Thing is, that trick of the brain is exactly what discourages driving and would result in fewer VMT. I don’t know — it just felt a bit like being in a prison, and I didn’t like that. I tried for three years. But I just like the freedom of my own car.

    2. Literally not how it works, with regards to incremental vs upfront costs.

      Studies (I think it was done at the Gates Foundation office here) have shown that charging for parking on a daily instead of monthly basis decreases parking lot utilization. The thinking goes that if you pay upfront, you’ll think “I paid for the whole month already, may as well drive” whereas with a daily charge you can change your mode as conditions allow. Same principle with owning a car vs carshare

      1. +1. The top-level comment is one of the silliest comments I’ve read on here for a while. I pay $500/ month on a lease for my car, $200/month to park it at my apartment, and maybe another $100/month to insure and maintain it.

        For paying those high fixed costs, I get a thing that gets me around for maybe 15c per mile. For any destination where free/cheap parking is available and I’m not (going to get) drunk, it’s basically irrational for me to do anything other than drive. This is exactly not the incentive anyone should want.

      2. That’s why I have a monthly bus pass. Without it I’m agonizing whether every trip is worth the cost. With it every additional trip costs less. I get a pass even when I’m going to be out of town for a week or two and it costs more than the individual fares because I like its convenience, and I forget I don’t have it and get on a bus and don’t have money. A monthly pass is to transit as owning a car is to driving. And parking would be the same.

        The difference is transit mobility is a basic responsibility of the city and benefits everybody, because the overall economy is improved if people can get to work and shopping and cultural activities and health appointments. And the climate situation isn’t so bad that we can’t even have transit — no city in the world is doing that. The optimal amount of transit is the trips people want to take. In contrast, with cars every trip and parking has outsized impacts, and large externalized costs which are borne by everybody except the driver/owner.

    3. Uh, the problem with car ownership is precisely that it is a large, fixed cost. Once you own a car, the is incentive to use it as much as possible.

  7. I’m a frequent carshare user. I’ve already had to replace some of those trips with Uber. Bikeshare is now too expensive to justify. It’s really sad. Getting people out of private vehicle ownership requires a diverse selection of alternatives for different situations.

    I especially like carshare to get from West Seattle to North Seattle…there is no fast public transportation option, plenty of parking on both sides, and it is not a cheap Uber/Lyft ride.

  8. Maybe Car2Go would be doing better, financially, if they didn’t brainlessly insist on thinking of the service as a luxuty marketing system rather than a transportation option.

    The fact that Car2Go continues to use expensive, high-end luxury-class cars, whose unnecessarily complicated gadgetry actually worsens the casual driver’s experience, should tell you that this company is more interested in marketing Mercedes cars than anything else.

    Bring back the Smart Car bumper-cars and see what happens. Car2Go and ReachNow slipped into this absolutely moronic luxury car mindset and — shocker! — plastic, fragile luxury cars make your system costs more expensive!

    Remember your first time sitting down in a ReachNow BMW and trying to figure out how to just get the god damn car started? You spend 10 minutes configuring the stupid car before you can even move it! The Smart Car was the perfect vehicle choice for this business model and I — for the life of me — can’t figure out why they aggressively insisted it couldn’t be done, other than the desire to let the marketing morons have a bigger say than the operations folks.

    1. This has been a bummer for me. I saw the limepods as a return to the smart fortwo that made car2go great, so I’m sad to see them go. It’s hard to park a full size Mercedes on the street in Capitol Hill.

    2. Car2Go is owned by Daimler. ReachNow was owned by BMW. The cars they are using are basically the cheapest ones those companies make. Daimler had to pull the Smart from the US market because it simply didn’t sell enough. The cost of federalizing and importing the cars just for Car2Go didn’t make any economic sense.

      The cost of the cars is not the reason these services are having a hard time. It’s Lyft and Uber. Last weekend my wife and I used a Car2Go to go to Capitol Hill for dinner and drinks. After dinner we used a Lyft to get home. The Lyft ride was $17 the Car2Go was $14. We had to walk 5 blocks to get the Car2Go and then find parking in Capitol Hill and walk to the restaurant. That $3 savings doesn’t really look that great. Now of course Lyft and Uber are losing money on every trip. You simply can’t compete with that.

      1. car2go needs reserved off-street car2go parking in Capitol Hill and a few other hubs, Ive seen this in Vancouver… essentially car2go hub stations

        Infact this could be great integrated into a mixed use development, with an underground car2go hub

  9. If we go back to just Zipcar, this means going back to no carsharing options at all (or just one car for a whole neighborhood) in places like Magnolia, Crown Hill, Greenwood, and Lake City.

    Once carsharing requires traveling beyond walking distance to pick up the car and return it, using it becomes a big hassle that, if needed more than a few times per year, becomes a big drag.

    Even in the u district, where I used to live, Car2Go’s were consistently closer to home than zipcars. Now, I live in Kirkland, and even the downtown has no carsharing options. The closet rental option available is an Enterprise that’s 40 minutes away (by foot), or a 15 minute ride on a bus that runs once per hour. I’ve done it a few times, and the daily rental rates are actually cheaper than Car2Go. But, due to the hassle involved, I rarely do it. Even if the Uber alternative runs at $80 round trip, I will still travel that way, since it’s easier.

  10. We will know when car sharing is economically viable when major corporations make it widely available. When Amazon, Costco and Google roll out widespread programs, they will have honed the concept to make it worthwhile. That goes for scooter sharing and bike sharing too.

    Meanwhile, it’s generally going to be a speculative business venture.

    The only other niche partnering I could see is if local retailers offer something to get customers back home. Still, I see them preferring to choose to offer delivery services rather than sharing.

    1. “This isn’t a viable solution unless a billion-dollar international conglomerate says so” is maybe not the best way to judge something.

  11. Another option worth considering is what the traditional car rental companies can do to take the hassle out of the experience. At least some allow you to swipe a card, hop in and drive, like Zipcar does, though the technology to do that is not very well deployed.

    Another option is to offer a premium service where, for an extra charge, a staff person drives the car to your home, saving you, the customer, from a round trip to the store altogether. (I guess the staff person could use Uber or Lyft to get back). Without driverless technology, it would be expensive. But, I can see $25-30 for a 3-5 mile radius penciling out. Even with that extra charge, it would still result in a price comparable to Car2Go for one day, and if you rent the car for multiple days, it’s a one-time charge for the entire trip.

    1. For years now, have limited the battle-damage to my car by mostly keeping it in a covered parking space and taking transit, cabs or walking. And maintaining up to date mental map of two-lane roads where I don’t see either head or tail-lights for whatever extra time it takes.

      But don’t let anybody tell you there’s no such thing as “The War on Cars”. Craters also known as “potholes” can leave your front end in same condition as a howitzer shell.


    2. Frank, can we have a “block” function for tiny hands like this non-entity and their “drive-by” shootings (off of their mouths)?

  12. “I pay $500/ month on a lease for my car, $200/month to park it at my apartment, and maybe another $100/month to insure and maintain it.

    For paying those high fixed costs, I get a thing that gets me around for maybe 15c per mile. ”

    $800 / .15 = 5,333…that seems to work out to 5,333 miles a month or 64,000 a year. I don’t see fuel listed: is that under maintenance?

    5,333 miles at 30 mpg is 177 gallons with $3/gallon gas (ballparking) $533/month on top of the $800 already mentioned.

    “Remember your first time sitting down in a ReachNow BMW and trying to figure out how to just get the god damn car started? ”

    Yeah, only time I used one was for a weekend trip ($300 for 5 days! Which means you have to see it for the full 5 days or we charge the $90 day rate for each day or part of one! Sucker!) and the network was down, meaning we couldn’t lock the car at any point without it closing out the trip and costing us the (nonexistent) package price. Good riddance to bad rubbish…

    1. People I know here in Portland use ZipCar for that type of thing. It seems to work quite well, even in remote areas.

      1. I used a car2go in Denver for a day, picked it up at Union Station after riding the A train in, drove it up to Fort Collins then back down to Boulder and Denver. Then I had it the following morning until my 24 hours was up, I remember struggling to keep it under the daily limit. But sure beat a rental car!

  13. I prefer using the free floating car share services over Uber and Lyft because I’ve lived in the area for 25 yrs so I know where I am going and how to get there the most efficient way whereas an Uber or Lyft driver depends on GPS and ends up taking the long slow way to my destination. So I hope free floating car share stays in Seattle.

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