ROBERT SIEGEL, host:
The auto rental companies Flexcar and Zipcar both rent cars by the hour. And that idea has been gaining in popularity. Well now, those companies are joining forces and with the merger, the former competitors hope to push the idea into the mainstream and change the way Americans think about car ownership.
NPR's Anthony Brooks reports.
ANTHONY BROOKS: Kerry Simon(ph) is a 29-year-old who owns a small business in Harvard Square in Cambridge. He needs a car a few hours a week to run errands for his company but he says owning a car in this congested city is out of the question.
Mr. KERRY SIMON (Businessman, Cambridge, Massachusetts): I mean, the price for insurance and parking and upkeep and all that. It is not - it's just too much. I'll probably, realistically, use a car like four hours a week, so there's no use to own one if I'll only be driving four hours a week.
BROOKS: So when Simon needs a ride, he relies on Zipcar.
(Soundbite of recording)
Unidentified Man #1: Leave that to your Zipcar number followed by pound.
BROOKS: With a cell phone, he can book a car on short notice for about $8 or $9 an hour.
(Soundbite of recording)
Unidentified Man #1: Thank you. Your reservation has been confirmed. You can…
BROOKS: The reservation system immediately sends a signal to the Zipcar of his choice just a couple of blocks from his store. Then, with his plastic membership card, he can open the car and be on his way.
Mr. SIMON: You tap the card to the window, it unlocks the car, the keys are already in the car, and you just go.
BROOKS: Zipcar was founded here in Cambridge and is the largest player in a small but growing car-sharing business. By merging with Seattle-based Flexcar, the new company, which will still be called Zipcar, will serve about 50 cities in 23 states, parts of Canada and London.
Mr. SCOTT GRIFFITH (Chairman and Chief Executive Officer, Zipcar): It's often said, you know, the sum is greater than the parts. I think this is a classic example of that.
BROOKS: That's Scott Griffith, chairman and CEO of the new expanded Zipcar. He says the merger is evidence that car-sharing has come a long way since the two companies were founded nine years ago.
Mr. GRIFFITH: Back in those days, many people would have said, hey, this is just a bunch of tree-huggers in Cambridge and it's never really going to be mainstream. Well, I'm telling - I'm here to tell you today that with this merger, this company is going mainstream.
BROOKS: The big challenge will be to convince enough Americans to give up the idea that car ownership is a birthright. Griffith says car-sharing is ideal for 50 percent of urban households that don't need a car every day. He says it reduces traffic and pollution and saves money.
Neal Abrams, an auto rental consultant, calls the merger a good idea because the two companies have similar business models and are rooted in different cities with virtually no overlap.
Mr. NEAL ABRAMS (Auto Rental Consultant, Abrams Consulting Group, Inc.): It really makes sense because there's a threshold that's required to make money in this business. You know, they have been chugging along, opening a market here, opening a market there, so this is ways that combine the resources of both companies. It just makes a lot of sense.
BROOKS: Abrams says the merged company will be able to save money on insurance and financing costs, which could move it closer to profitability. It will do about $100 million a year in business. But Scott Griffith of Zipcar hopes it will eventually reach two million customers and become a billion-dollar-a-year company. Analyst Neal Abrams is skeptical and calls car-sharing a niche market. He points out that neither company has turned to profit. Even so, he says, the new Zipcar has a good chance of success.
Mr. ABRAMS: Is it, you know, going to make a huge dent in the $20 billion real market? Probably not, but if they could do $100 million collectively between both brands, that's still a significant business.
BROOKS: And it's a business that some of the big car rental companies are beginning to notice. Hertz, Enterprise and Thrifty Rent-a-Car have all begun to move into the hourly rental business as well. And as long as people like Kerry Simon of Boston continue to see the value of car-sharing, Zipcar could be on the road to profitability.
All right. Well, have a good ride.
Mr. SIMON: Thanks. I appreciate it.
BROOKS: Anthony Brooks, NPR News.
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