BRW: Share exchange - covering corporate car share and outsourced fleet service
BRW: Share exchange
Report: Jeffrey Hutton
BRW | 05 Jun 2008 | Page: 44 | Focus
In congested cities with increasing parking and petrol costs, car-share companies offer an economic alternative.
Patrick Franklyn, co-ordinator of the workplace internship program for the Sydney campus of Philadelphia's Arcadia University, knew exactly how he would travel to a meeting he had in Bondi. By taxi, the trip from his office in Glebe may cost $50, depending on the traffic. Instead, as a member of Sydney car-share company Go Get, he booked a vehicle online and walked no more than five minutes to the closest one. With the swipe of a card, Franklyn was on his way. Total round-trip cost: about $20.
"As irregular car users, it's been really great for us," Franklyn says of his office of about 12 staff. "It's totally convenient."
The experience shows the growing popularity of car-share services as increasing petrol and parking costs as well as congestion make the upkeep of a fleet or private car impractical. Franklyn, a landscaper by training, says his office would need two cars without the service.
Membership of Go Get, the biggest car-share company in Sydney, will balloon to about 3500 by the end of the year, up from 2000 at present, founder and director Nic Lowe says.
The company expects to operate as many as 200 Toyota Yaris hatchbacks by the end of the year - up from only three vehicles when it started five years ago.
The growth has meant the company, which Lowe started with business partner Bruce Jeffreys, has grown out of its one-room office above a church in Glebe. "We relieve a lot of headaches," Lowe says. "It's a very easy thing to use the car for a meeting and then drop it back."
At the centre of the car-share business model is a system that aims to minimise the time vehicles stay idle - allowing another user to drive it rather than let it stay parked. Private cars are used on average an hour a day, Lowe says.
A car-share scheme could see a car driven into the city for a meeting by one user and parked at a common-use bay. It could then be booked by a local business to run errands in town, only to be picked up by a third user in the evening for a trip out to the airport.
While the service may encourage some people to drive who otherwise could not afford it, it also prompts some inner-city dwellers to sell or defer buying their own car. Each of his Go Get cars - or pods, as they are known - saves about seven private cars, Lowe says.
When members join a car-share company, they are mailed a swipe card. Members make a booking online and are instructed which vehicle to use. The booking system sends the details to the reserved car.
The member then swipes a card on the sensor, typically mounted on the car's dashboard, which unlocks the car and engages the ignition. At the end of the trip, details are relayed to the booking system, which bills the user's account.
Private companies are noticing that car-share services either lower or eliminate fleet expenses, or simply ensure that employees have a well-maintained, tidy car when they need it. "With company cars at small companies, there is a tragedy of the commons," Lowe says. "No one takes care of it."
Charter Drive, Go Get's nearest rival, says it has signed on construction company Mirvac to its car-share service. Mirvac uses the cars to cover its peak demand times.
Charter Drive operates a fleet of Smart cars that carry advertising from other companies to earn extra revenue, as well as Mercedes A Class compacts.
Founder and director Paul Reichman says although some staff need their own vehicles, a car-share service can halve the number of cars a company keeps. He is aiming to "stack" his branded Smart cars in office buildings and residential apartments for tenants to use, creating extra income for property owners.
Cramming Smart cars close together into an underground park where the first one in is the first one out means 12 vehicles can be squeezed into four parking bays.
"We saw an opportunity for outsourced fleet management," says Reichman, a one-time equities analyst with Credit Suisse First Boston in South Africa. "From a macro point of view, this business is about managing resource scarcity."
Reichman struck a deal with garage Secure Park to use its space. His fleet of 45 cars dot Sydney's central business locations such as Martin Place and Circular Quay, as well as high-density, inner-city residential areas such as Kings Cross and Darlinghurst.
For both Go Get and Charter Drive, wooing businesses to its car-share program is the road to profits. Residential users want the cars after work and weekends, businesses spread their driving throughout the day. "We are focusing on the business market," Reichman says. "It's the only way we can be viable."
Charter Drive makes sure there is a supply of cars for businesses in the city by offering discounts for arriving in town before 7.30am. The discount means members can drive into the city with a Smart car and park for about what it would cost others arriving in private cars at the same time.
Go Get is helping Yarra City council in Victoria to manage its fleet to ensure workers share their cars more efficiently. The company also offers its Yaris compacts during times of peak demand. While it's still early days for the program, Lowe says he can reduce Yarra City's fleet size by between 5 and 25 per cent.
Bringing in a car-share company to manage the fleet and distribute cars when their primary user does not need them underlines for employees that staff cars are not an entitlement, Lowe says.
"It moves the needle in that particular debate," Lowe says. "Some staff were driving to work and parking miles away to be sure they could get a staff car to drive home at night."
Car-share companies also strike a chord among those keen on curbing carbon emissions. Go Get, which started in Sydney's Newtown, has cultivated a devoted following among the environmentally conscious. And it lets some of its members tidy the car and run errands in return for use of the car.
"Being a member of Go Get speaks to our core values of employing sustainable practices," Arcadia University's Franklyn says.
Rising petrol prices, salaries and parking fees take their toll on car-share companies, too. Both companies say having enough cars and a broad network will help lift profits. Charter Drive wants to double its fleet in the next six months.
Still, Go Get only made a profit for the first time six months ago. The company says profit margins are about 5 per cent. It is aiming for more spots in the central business district, and that may become easier.
The City of Sydney recently reserved 110 spaces throughout the city for car-share companies, Lowe says. City council will turn around a request for a parking permit for car-share companies in 48 hours. "Council loves it because it means less space they have to devote to parking," he says.
That is a far cry from when Lowe and Jeffreys first pitched the idea to the city council. The municipality baulked at surrendering precious residential car spaces to a business. Go Get resorted to using the residential parking permits their members were entitled to.
Charter Drive, which started in 2006, has had an easier time and already boasts 50 per cent profit margins thanks to its CBD locations at Secure Park, and as advertisers warm to the company's Smart cars. Recent advertisers include Samsung and Unilever.
While both Reichman and Lowe agree their services will become commonplace, they differ on the number of members that will share each car. Lowe expects about 15 members to a car while Reichman is betting on up to 40 a car.
Reichman estimates there is room in Sydney for about 400 car-share vehicles. "Car sharing will eradicate surplus cars," he says. "This model is going to be ubiquitous when we have the reach to service the market."
For Franklyn, whose office has been a Go Get member for four years, having Go Get vehicles throughout his neighbourhood has already been a boon. Since joining he has only needed to use a cab for work twice. "I can't praise it enough," Franklyn says.