Last week Philly Carshare took the unprecedented step of selling itself to car rental giant Enterprise - ending a significant chapter in the early history of carsharing in North America. Exactly what it portends for the future is hard to say right now.
Philly Carshare was reportedly under the gun to pay $2.7 million in car rental taxes it had not charged members for during the past several years. It was reportedly having trouble paying creditors, as well. Reports say that Enterprise is expected to retain the Philly Carshare name and employees. The press annoucnement also says it will operate the service independently of their car rental operations and makes no mention of the company's own WeCar carsharing brand. Here's the official press release (PDF).
Founded by Clayton Lane, Tanya Seaman and several others in 2002, Philly Carshare (PCS) was started on a shoe string - $23,000 legend has it, and grew carefully and strategically, getting cars to break even sometimes in less than a month. At one point they had over 400 vehicles and 50,000 members (claiming 20% of residents in the center city in 2009) but had scaled-back to 250 vehicles and about 13,000 members. They even opened a branch in Wilmington, Delaware in 2007.
I always found Philly Carshare highly innovative:
- Unorthodox pricing system — like other non-profit carshares in North America, PCS had separate charges for both an hours and miles; but unlike the others, they kept the distance charge low - 11¢/mile at one point, rather than 40¢ per mile City Carshare and others were charging; this retained an incentive for members to think twice about long distance trips, but provided a better balance in revenues, so that members were not penalized for taking short distance long duration trips, as an hourly-only rate structure does (Currently the PCS hours + miles plan starting at $4.45/hour + 25¢ per mile with $15/mo. membership fee; as well as an hourly-only rate plan starting at $7.50/hour (includes 185 miles per reservation)
- City fleet program — in 2004 they gained national prominence putting together a partnership to allow employees of the City of Philadelphia to drive PCS vehicles; reducing the city's fleet by 330 vehicles
- Early insurance program to allow 19 year old to use carsharing
- Keys to the City program — an early high-profile partnership between merchants and the company - offering members exclusive discounts.
- Impact evaluations — PCS documented the benefits of carsharing to the city and to their members in several very well structured evaluations that should be a model which other cities should expect from their carsharing partners, such as this one.
PCS was also an on-going challenge to Flexcar, which started competing with PCS in April 2007. After the Flex-Zip merger later than year, Zipcar took off the gloves in 2008 and won the city contract, perhaps the start of their problems. Things got messy at Philly Carshare in a boardroom battle that ousted the founders, the following year.
Meanwhile, Philly Carshare has continued to innovate - announcing the 1,000th rider in its Philly PatientRide program, in conjunction with 4 area hospitals and the American Cancer Society, which provides volunteer drivers. It also announced plans to add 16 electric vehicles to it's fleet in the summer of 2012.
The Reaction
The reaction of independent carshares (everyone but Zipcar and Hertz) have expressed public concern - the loudest voices coming Canada and Australia in this press release.
The largest carsharing organisations in Canada: Autoshare in Toronto, Communauto in Quebec and Modo The Car Co-op in Vancouver, hope that the acquisition of PhillyCarShare by Enterprise Holdings will not change its environmental and social objectives - which they have held for nearly 10 years - into a car rental program. “Carsharing and car rentals do not serve the same purpose, needs, community objectives or the same transit goals”, Tanya Paz, Business Development Director, Modo.
Even Car Sharing Association member Nic Lowe of GoGet Carshare from Melbourne, Australia wrote the Philadelphia Inquirer complaining that they "smelled a rat" in the deal, since the deal (which he estimated at something less than $2.7 million) seriously undervalued the company, which he said might be worth $5 to $7 million based on Zipcar's recent IPO numbers.
What does it mean?
First of all, it's certainly sad to see such formerly great organization get itself into such a mess. At least since the ouster of the PCS old guard, which is a story unto itself, the Board of Directors has been struggling to get the organization back on its feet but a $2.7 million tax bill would be a challenge for any non-profit. So my hats off to the PCS Board for getting what appears to be a pretty decent deal for all parties - including, I hope, their members.
My take is Enterprise also deserves some serious respect for taking on a $2.7 million debt and not just letting Philly Carshare go down the tubes and then setting up shop. It's an interesting move for Enterprise, which doesn't seem to have been to aggressive in trying to develop the city-wide carsharing market beyond the WeCar service in their home-town of St. Louis.
Enterprise has always been a problematic carsharing operator — as the king of neighborhood car RENTAL, potentially they have the most to lose from neighborhood car SHARING, unless they get the relationship between the two right. And Enterprise has consistently been arguing in public that carsharing is just like car rental, such as during the rental car tax spat in Chicago a couple of years ago. (I'm a firm believer in the concept that taxes should be applied to what don't like and not to tax what you want more of.)
And you gotta wonder where Zipcar was in all this - they could have had the market to themselves by acquiring Philly. Presumably the PCS Board talked to them all and did the best they could.
Now the challenge is for Enterprise to engineer as smooth a transition as they can to bring along as many of the current PCS members to the new day of carsharing — Philly WeCarshare?
And, for the rest of the carsharing industry it's a good reminder of the importance of laying the political groundwork to get exempted car rental taxes. Meanwhile we will watch developments in Philadelphia with great interest.
