IT Behind Zip Cars Helps Redefine Car Rental

By Sheena Mohan  |  Posted 01-06-2006
For city-dwellers, car ownership can be more of an albatross than an amenity. The occasional trip to the grocery store or Ikea is hardly worth the high cost of gas and parking (not to mention those pesky parking tickets). That's why there's Zipcar Inc., the Cambridge, Mass.-based car-sharing company that seeks to replace the grind of car ownership with what it calls "a new model for automobile transportation." And it's a model that wouldn't exist without some clever use of technology.

Zipcar is very different from national rental-car agencies such as Avis and Hertz. Members register with the service online and receive a Zipcard through the mail. The Web site tells members where Zipcars live nearby, usually in garages or reserved spaces, and when they are available. The cars can then be reserved online, and rented by the hour or the day. The Zipcard is a smart card that acts as a member's "key"; it opens the car door when passed over a reader placed inside the windshield. When a member is done with the car, they return it to the original spot, lock the door and walk away. All without the member ever seeing or speaking to an actual human being. "We have 50,000 members randomly accessing 1,000 vehicles, 24 hours a day, seven days a week," says CEO Scott Griffith. "And we do this with a companywide employee base of 44 full-time people."

The business model is yet another evolution of the self-service economy enabled by technology, and not surprisingly, it makes Zipcar far less expensive than the competition. A typical rental car in Manhattan will set you back $150 a day. A Zipcar will run you $65, and that includes insurance and gas. There are a few extra costs, however. Members pay a $25 registration fee and a $50 annual membership.

So how do they do it? Zipcar uses Cingular's wireless network to stay in constant contact with its fleet of over 1,000 cars in New York City, Washington, D.C., Boston and San Francisco. The company sends a signal to the appropriate Zipcar when a member has made a reservation, instructing its doors to unlock only for that specific member at that specific time. "A car won't open unless it recognizes that you're supposed to be driving it," says Roy Russell, vice president of engineering. The Zipcar then responds when a member opens the door, letting the company know that a vehicle is in use. Zipcars also communicate with fleet headquarters when a battery is running low, or when they need an oil change. And to ensure their cars get all of this crucial information, Zipcar uses cellular relayers to boost the signal at some garages. "One time I lost my card, so I called Zipcar and they were able to unlock it remotely," says Jeremy Patuto, an IT director at Gramercy Consultants LLC, in Brooklyn, N.Y., and a Zipcar member. "The car was in the bottom of a parking garage. I couldn't even get a cell phone signal down there."

Zipcar may sound like some warmed-over, dot-com concoction, but the company was actually profitable in 2004. Still, with just 50,000 members nationwide, Zipcar isn't exactly taking it to the national car-rental agencies. According to Mike Kane, president of Vehicle Replacement Consulting Group, a consulting firm for rental-car companies, Zipcar may attract some customers away from the larger rental agencies that have an urban presence. But the company occupies too small a niche to give giants such as Hertz and Avis much to worry about. "I would be very surprised to learn, however, that the larger companies aren't investigating similar types of uses for technology," Kane says.

All of which is just fine with Zipcar executives. They've got their sights set on a much bigger target: Detroit. "We think the convenience and ease of using a Zipcar makes us able to compete effectively with car ownership," says Russell. Watch your back, GM.