As Car Sharing Grows, Carmakers See an Opportunity

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New Yorkers are taking to car sharing. New York's two smaller car share companies report double and triple digit membership growth in the past year. Several companies have expanded into Harlem in recent months, and plan further offerings in New Jersey and the outer boroughs. Car sharing companies have traditionally focused on Manhattan below 96th Street and parts of Brooklyn closer to Manhattan.

Hertz's hourly rental offering, Hertz On Demand now has 30,000 members in the New York area, a three fold increase over last September, according to the company, which launched car sharing in December 2008.

Mint Cars-On-Demand, a local company targeting small businesses, reports growth has accelerated 50 percent over last year's pace. They have about 125 cars and 10,000 members with hourly rentals starting at $7 per hour.

New York is Zipcar's largest market with 2,100 cars in the area. The newly public company declined to share growth statistics by press time, though it has launched an extensive subway advertising campaign.

As the practice of renting out cars by the hour catches on in New York and nationwide, car makers are planning on new ways to capitalize on the trend. The reason, is younger drivers.

"They represent about 40 percent of car buyers and they drive a lot less than the generation that preceded them," says Carroll Lachnit of She says car makers need new ways to reach Millenials who are less likely to rush to the dealership on their 16th birthday, and after that, far less likely to become loyal to a brand for life. Lachnit says that first purchase comes later now, so car makers need to do more than just offer a test drive and a low interest loan. Car sharing can fill that void and be the first -- and second, third, fourth -- exposure to a vehicle for a young driver who is  a future driver.

That's one explanation for why Ford offered up thousands of cars to ZipCar for university car share programs. And why GM is using its OnStar technology to facilitate peer-to-peer car sharing through RelayRides. As we reported last week, GM also gets a cut of the rental profits, but more than that, GM's Bob Tiderington explained to TN, car sharing is like hassle free test drive. In many ways, it's better than a test drive. Drivers get more time in a car, can test a car out at night, and try out a single car over and over in different conditions over time before it comes time to make a decision.

The premise is that car sharers will grow up to be car owners.

That's assuming that car sharing is convenient, but for now, it's still a tiny fraction of drivers.

Nationwide there are about two dozen car sharing companies with more than 500,000 members in total, according to Susan Shaheen of the Transportation Sustainability Research Center at U.C. Berkeley. She says it's way too soon to know if the car companies' plan will work. But some initial research does indicate that there is some brand loyalty developed.

For more on car sharing as the new test drive, including what one skeptical car dealer has to say about it, listen to this story on Marketplace Money.

Additional reporting for this article by Casey Miner.