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I work in Boston, a city where someone recently paid $300,000 for a parking spot. Drivers are constantly circling as they hunt for an opening. Add the notorious aggressiveness of Boston drivers and the high insurance rates into the mix, and it becomes clear why this is one of the most expensive and difficult places in the nation to own a car.

So it’s probably no coincidence that this is where Zipcar was founded more than a decade ago. At first, the company that introduced America to rent-by-the-hour, pay-as-you-go car sharing grew slowly. Rivals saw it as a niche market for the ecologically minded and others who were willing to ditch their full-time vehicles.

But the advent of the smart phone has helped reshape the way Zipcar operates, greatly broadening its appeal. Launched two years ago, Zipcar’s app for the iPhone has been downloaded by 400,000 people, who use it to locate the nearest available car and even honk its horn. That has made it much easier for customers to find cars wherever and whenever they want one. Now the company has expanded to 55 cities and 225 college campuses in the U.S., Canada, and the U.K.

By letting customers book cars spontaneously with their mobile phones instead of making reservations ahead of time on PCs, Zipcar has found a much easier way to manage its challenging logistics. Unlike a big car-rental company, it arranges many short-term rentals in widely distributed locations. Customers must return the car to its home spot, which is often on a side street—a different model from the central lots that most rental companies use. At Zipcar’s fleet control centers, operators can keep track of vehicle demand, driver reservations, and car maintenance schedules using home-grown software called FastFleet that it is marketing to other vehicle management companies.

Whereas standard rental cars are typically rented for $30 to $80 a day from just a few places in each city, Zipcars typically rent for about $10 per hour from hundreds of places. The fee includes insurance and a gas card for refilling the tank as long as you stick within mileage limits. The deal makes sense for college students, busy professionals, and other people who don’t want to use an airport-based rental service but do need a car for part of a day now and then.

Since Zipcar has shown that a mobile app and special software can help tackle the logistical challenges of car sharing, rivals have been following suit. Six months ago, Hertz launched an iPhone app that functions in much the same way for Connect, its own Zipcar-like program. Whereas Zipcar has 6,500 vehicles, Hertz has nearly half a million, although only about 1,000 of those are available through Connect. “As we began to look at [Zipcar] and to see that model grow, it was a natural evolution for Hertz,” says Joseph Eckroth, Hertz’s chief information officer.

Meanwhile, Enterprise Rent-a-Car has launched a car-sharing program, WeCar, in six cities so far. The Avis Budget Group has yet to develop one, but it did develop an iPhone app for reserving vehicles at traditional locations. “Look at how things have changed in the last 12 months,” says John Peebles, vice president of online marketing for Avis. “It’s astronomical.” Customers have been adopting smart phones so rapidly that it’s become mandatory to offer an app, he says: “It wasn’t in your strategy last year, but it’s got to be this year.”

For Zipcar, mobile was on the radar early on. “Within 12 months of the iPhone being introduced, over 20 percent of our customers had already purchased one,” says Lesley Mottla, Zipcar’s vice president of member experience. Now, she says, most of its customers have smart phones. Apps for those devices increasingly serve as the company’s customer interface; unlike the other rental companies, Zipcar operates without any storefront locations.

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Credits: Technology Review, Zipcar
Video by Lauren Cox, edited by Brittany Sauser

Tagged: Business, Business Impact, business, The Mobile Enterprise

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