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Airbnb for cars is here and rental car giants are not happy
THEY have fleets with hundreds of thousands of vehicles and command multibillion-dollar streams of revenue. But in the rapidly shifting transportation landscape, even the Goliaths of the rental car industry - some of the top brands in the world - worry about being left behind.
That may explain why some of the largest rental car companies have spent several years waging a quiet legislative war against startups led by a company called Turo that are trying to change the way people rent and own vehicles.
Turo is a peer-to-peer car-sharing company - think Airbnb for cars. Like Uber versus the taxi industry, this fight is a clash between an old-school business model and a modern technology platform inspired by the sharing economy.
The traditional model is run by hulking corporate brands that promise safety and predictability. At any airport, a customer is assured he will get a car. But the new model offers a more customised experience in a process that mimics online dating.
While each offers a way to rent a car, the ultimate factor in their long-term success might actually depend on changing attitudes about the value of car ownership. In America, the average price of new vehicles has zoomed over US$33,000, leaving people to wonder whether there's a way to get more value from them.
Turo, and other car-sharing companies, say they offer a way for car owners to maximise the value of these expensive assets, or even help to pay for them, by earning money off them when they might otherwise sit parked. For drivers, they offer flexibility and convenience.
If you've rented a car at an airport, you may understand why such startups think they should come out ahead. After landing and baggage claim, you wait in line for a shuttle that drives you to a rental car company, sometimes miles away.
Once there, you may encounter another line, as well as paperwork and varying prices and other hassles.
Jon Norris, 42, a former rental-car company employee who lives in Bethesda, Maryland, and works in cybersecurity, believes that sort of unnecessary stress explains the growing appeal of Turo, that he's been using since November to rent out his two Audis. He often meets his customers at the airport, handing them the keys to their rental as soon as they walk outside. There's no paperwork, no credit cards and no hassle, he said.
"When I do curbside delivery, everything is downloaded to the app beforehand, and literally within two or three minutes they're in the car and on their way," said Mr Norris, who earns about US$1,500 a month renting out his vehicles.
The ease of the transaction, all of which occurs using a smartphone, may explain why airports have become the front lines in an emerging war between companies such as Enterprise and Hertz and Turo, a relatively unknown Silicon Valley upstart with about 180 employees.
Turo allows its 200,000 members to post vehicles online and rent them out for as little as US$10 a day. Turo says the firm is a technology platform that allows car owners to earn extra cash, not a rental car company. As it owns no vehicles, it says, it shouldn't be subject to the same regulations as traditional rental companies.
Those rental companies, represented by the American Car Rental Association (ACRA), say that car-sharing companies such as Turo are clearly car-rental companies. The only difference between Turo and Enterprise, officials say, is that Enterprise complies with state and federal laws governing rental car companies, while Turo has so far avoided them.
"If you're renting a vehicle to another person for compensation, that is a car-rental transaction," ACRA lobbyist Gregory Scott said. Instead of waiting for the competition to comply, the rental industry has introduced bills replete with new regulations for car-sharing companies in more than a dozen state legislatures nationwide, including a bill under debate in Maryland's General Assembly. If turned into law, those regulations would treat car-sharing companies like traditional rental car companies.
ACRA officials, who support attempts to regulate car-sharing networks, say their goal is to level the "playing field". The networks enjoy an unfair advantage and put public safety at risk, ACRA says. Their members might bypass annual inspections and not track recall notices, making the roads more dangerous. They also operate freely at airports instead of in designated areas, which adds to chaos and congestion.
The trade group is supported by airports with a big stake in this dispute: the billions of dollars they take in annually to lease lots to rental companies. But Turo, the most outspoken opponent of the legislation, says rental-car giants have another objective in mind: destroying competition by squelching innovation.
If car-sharing networks are allowed to thrive, experts say, the legacy rental companies might have cause for concern. "The advantage peer-to-peer has over traditional rental companies is they don't own the fleet and they're more lean and adaptable and have a better understanding of the local market," said Alexandre Marian, a director in the automotive and industrial practice at consultant AlixPartners.
Founded in 2009, Turo and Getaround - another popular service that ACRA accuses of skirting the law - are the most well-known startups in the peer-to-peer market. Whereas rental car prices differ according to demand and location, these companies allow members to determine the price of rentals. The average owner, they said, makes about US$500 a month through the service.
Nearly 5 million people have signed up to rent vehicles via Turo in the past two years, and the company is already valued at around US$700 million. Getaround operates in 14 US cities and says it has more than a half-million users.
The business model has proved so promising that even General Motors and Ford, an early investor in Getaround, have taken notice. In March, GM confirmed plans for launching a pilot programme that will allow owners to rent out their vehicles when they're not being used, generating revenue that will be shared with the massive carmaker.
ACRA officials say traditional companies are supportive of the peer-to-peer model and recognise its growing popularity. In a statement e-mailed to The Washington Post, Enterprise Rent-A-Car - one of ACRA's more vocal members on this issue - said that it was itself "an industry disruptor 60 years ago" and that the company has "always been open to new ideas and innovation.
"However," the statement said, "we believe the playing field should be level and fair for everyone involved in ground transportation - and that's especially true when it comes to safety issues like designated pick-up airport locations as well as any legal restrictions concerning manufacturer vehicle recalls."
Though they have been largely unsuccessful outside of New York, the bills typically seek to impose taxes or regulations on Turo, such as forcing the company to commit to annual vehicle inspections and additional registration.
In Maryland, a bill introduced by Enterprise would force Turo to collect sales tax, introduce safety inspection and remove cars with recall notices from their site. The bill under debate would also force Turo to abide by the same permitting process at airports as rental car companies.
Airports have become the front line in the battle between car-sharing and rental companies. For decades, rental car companies have paid airports on average 10 per cent of their gross receipts - an amount worth billions - for the privilege of setting up shop.
Turo's head of government relations, Michelle Peacock, said that without access to vehicle titles and VIN numbers, Turo doesn't have access to recall notices. And in Maryland, safety recalls don't prohibit vehicles from being legally driven.
But Rosemary Shahan, president of the Consumers for Auto Reliability, said Turo's leadership is ignoring the potential disaster that awaits if a single recalled car on the Turo platform results in a deadly crash.
Regardless of what Maryland legislators decide, a question for other states remains: Is Turo a rental car company in Silicon Valley camouflage, or a technology company steering the future of mobility? WP