Is borrowing a stranger’s ride the death of car rental?
Peer-to-peer hiring of vehicles is taking on the established rental industry in the US and UK
Andre Haddad can barely contain his excitement as he flips through the vehicles available in London on his car rental app, Turo.
“There’s a 1989 3 Series convertible – it’s got eight trips already! I love it. Or this Land Rover Defender, or the Audi A4, the BMW 5 Series, the Jeep Renegade,” he says as he scrolls down the screen. “Lots of electric cars – Tesla is a big hit in the UK.”
The company, he says, has caught the eye of the UK’s car enthusiasts, who use it to rent out other people’s classic cars simply for the joy of taking them for a spin. So-called “peer-to-peer car sharing”, where vehicle owners let other drivers use their vehicle part time, for a fee, is better established in the US than in the UK. But San Francisco-based Turo, which launched in Britain in September, says it now has 4,000 British cars on the app and 92,000 users, with 5,000 new people joining each month.
In the US, the firm, which alongside competitor Getaround makes up the US market, claims it is engaged in a David versus Goliath war with the established car rental industry – dominated by the big three of Avis, Hertz and Enterprise. The car hire industry itself says it simply wants Turo to be subject to the same rules and regulations as everyone else.
As the fledgling industry expands, the upstarts could find themselves in a similar situation to Uber, which spent years battling taxi drivers around the world. The apps, which position themselves as starting a new “car sharing” industry, allow individual owners to lease their vehicles for anything from a few hours to a few days, in the same way that Airbnb lets households let out their rooms. Neither Getaround or Turo publish financials, and Turo refused to say whether it is profitable or not.
The companies can typically take a larger cut than that taken by minicab-hailing apps such as Uber and Lyft, because car owners are not trying to make a living out of the apps, but merely supplementing their earnings to pay off car loans and expenses, Adam Stocker, of the Transportation Sustainability Research Center at UC Berkeley, says. “You’re just trying to get whatever money you can get off an otherwise idle asset. The cuts that they allow the providers to take seem to be a lot higher than other peer-to-peer services that I’ve seen.”
It also doesn’t have to worry about the same rows over pay and benefits for drivers, or about the cost of buying and maintaining a fleet. Under the traditional car rental business model, margins are tight, and cars are expected to be out for rental about 80% of the time, research by the unit suggests.
However, car renters could be squeamish about getting into a stranger’s car – particularly business customers – and critics say the safety risks are higher. Some of the unwillingness has been mitigated by the precedent of ride sharing, says Stocker. “I think people have got more comfortable with at least the idea of the peer-to-peer model in general, just through how explosive the growth of services like Uber and Lyft have been.”
But those companies have been far from immune from disasters caused by unsafe cars, passengers and drivers. Are car-sharing firms concerned that they might have the same issues? It’s a risk, admits Haddad. “Ultimately, we are connecting people, and if people don’t behave well with one another – there’s that element of human responsibility,” he says. “That’s not the platform’s responsibility, that’s really the responsibility of the hosts and the guests.” Good hosts, who get good reviews, he says, are bumped up to the top of the app, while worse ones are demoted.
In California, its biggest market, the company has started to do automatic checks for vehicle recalls to pick up cars that are not fit to be on the road.Car rental companies argue that Turo should have to abide by the same rules as they do on taxes, safety and insurance. For example, in the US, rental firms already have to abide by a law which prevents them renting out a car that has a recall against it. Some of the ongoing legal battles are with airports, which have sued the company on the grounds that Turo cars are clogging up kerbs and failing to pay the permits that would allow them to be there. But Turo claims it is a different type of business and shouldn’t be regulated like a rental company.Enterprise says: “We welcome all competitors, and merely ask legislators to ensure that competition is fair.” Turo, far from a small start-up being picked on by a larger rival, is a powerful, well-funded company in its own right, it argues.In the UK the row does not yet appear to have got off the ground. “I think in the US there’s more room to create mischief than there is in a lot of other jurisdictions,” says Michelle Peacock, Turo’s head of government relations. Regulation efforts in the UK are more transparent, and less influenced by the armies of lobbyists – on all sides – who have a great deal of power in the US. The company will be “much more thoughtful and proactive” with regulators in the UK, says Haddad.
Ultimately, analysts say, there should be space in the market for both, with peer-to-peer sharing best suited to short-term trips and the traditional rental system working better for one-way journeys, longer-term business trips or holidays. There could even be a new wave of mergers, as car brands seek to cash in on a potentially lucrative business model. Many of them have already invested in a fleet-based arrangement where they provide their own cars for customers to borrow. In 2018, General Motors launched its own car share system, and Audi and Toyota also have their own services. Zipcar, a fleet-based car sharing company, operated through an app, was bought by car rental giant Avis in 2013. Daimler has also invested in Turo, leading a $92m funding round in 2017, and the German auto company was one of the first into the sector when it founded car2go in 2008.
“Companies are trying a variety of things to see what sticks, what doesn’t stick,” says Valerie Sathe Brugeman, of the Centre for Automotive Research, which has been researching partnerships in the auto sector. “This seems to be a good overall business model, so the longevity of this idea of car-sharing, it has staying power. It bodes well.”
– © Telegraph Media Group Limited (2019)