Common Tragedies

Thoughts on Environmental Economics

Zipcar + PHEVs = Awesomeness

Posted by Rich Sweeney on August 5, 2008

Last month I read an article in Slate on how gas prices are affecting Zipcar’s profits (actually, losses). One of the perks of Zipcar is that fuel costs are included in the flat hourly rate. This of course encourages people to drive more. Now this pricing scheme made a lot more sense back in 1999 when the company started, as gas prices were under $2 a gallon. Yet as the Slate article reports, Zipcar has been reluctant to raise its prices for fear of alienating it’s young and fragile customer base, especially at a time when many people are probably considering getting rid of their cars. The result is that Zipcar has only raised its prices 3-5% in the past year, while gas prices have increased by 36%. That’s pretty remarkable for a company still trying to turn its first profit.

Fortunately I have a solution. Zipcar should team up with Chevy (or some other electric car manufacturer) to convert their fleet entirely to PHEVs. This would solve Zipcar’s gas cost problem, and would probably reduce the variance in variable costs per rental, allowing the company to better price its product. It would also reinforce (justify?) the company’s “green” image. PHEVs are obviously going to be relatively expensive in the short term, but I think it might make sense for Chevy to provide Zipcar with a fleet of Volts at substantially reduced price. The only meaningful thing I learned from Who Killed The Electric Car? is the importance of visibility and trial in promoting electric vehicles. People are skeptical about the cars’ reliability, power, appearance, etc. Marketing alone won’t be good enough as fears like this can only really be allayed through experience. A partnership with Zipcar would go a long way toward getting people familiar with Chevy’s new product. Given the long term potential of PHEVs it seems worth it to incur some up front costs.

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2 Responses to “Zipcar + PHEVs = Awesomeness”

  1. iGo is a company similar to ZipCar that uses hybrid and other (relatively) high-mpg vehicles. I saw them all over Chicago on a recent trip (Priuses and Fits, mostly). ZipCar will probably have to do what you’re suggesting to compete.

  2. Ari said

    Then there’s HOURCAR, in the Twin Cities, which has two PHEVs on the road already. They even got a grant to put up solar panels to power them, one each in Minneapolis and Saint Paul. See http://hourcar.org/index_solar.html.

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