Car sharing is a great idea, so why are so many car share companies failing?

In 2016, after having recently moved to Oakland, California, I saw a black and blue Prius, its windows painted with ads for a new car-sharing service called Gig Car Share. The service allowed users to pick up cars with an app or a physical card, drive it anywhere within a designated “home zone,” and leave it at a streetside parking spot.

The idea was that this type of free-flow car-sharing could complement public transit, bike-share, ride-hailing, ultimately helping reduce car ownership. I didn’t have a car, and wanted to live car-free in the East Bay, so Gig Car Share seemed perfect for me: I used it to get to a hiking trailhead, the BART station, or home with a load of groceries from Berkeley Bowl. Over the next few years, Gig expanded its home zone, launched in two more cities, Seattle and Sacramento, and looked to be building a sustainable model.

In August, the dream suddenly came to an end, as Gig announced it would be shutting down at the end of next month due to “decreased demand” and “rising operational costs.” It is the latest setback for the car sharing model, which once seemed like a critical component of the future of mobility. Gig’s shutdown follows recent failures by Mercedes-Benz’s Car2Go, GM’s Maven, BMW’s Reach Now, Uber’s Car Next Door and Blue Indy, leaving only a few local operations in the United States alongside Zipcar’s fixed model.

“The short answer is that the costs didn’t work out,” says Colin Murphy, director of research and consulting at the non-profit Shared-Use Mobility Center (SUMC). “In general, I think that free-floating just adds a layer of labor costs on top of a very low-margin business.”

Car-sharing and the last-mile problem

Gig Car Share was backed by AAA Mountain West Group (MWG), which had set up a new entity, A3 Ventures, to support new innovations in mobility. For an organization with a history of supporting America’s car-centric culture and opposing investments into public transit, it was a noticeable shift. AAA MWG declined an interview request from Next City, while A3 Ventures did not respond.

In their launch press release, AAA MWG noted that “as transportation habits change, particularly among Millennials, offering a flexible, environmentally friendly car-sharing model is the latest example in how we provide value to our members.” Early press releases and marketing pointed to reducing car ownership and reaching youth and urban residents who wanted a car-free lifestyle as Gig’s goals.

The free-flowing model utilized by Gig and Car2Go was distinct from the stationary car-sharing model pioneered by ZipCar. I had a ZipCar membership, too, but only rarely went to the nearest cars, 15 minutes away, whereas I used Gig multiple times per week.

Gig made car-sharing more integrated with public transit, with designated parking spots at several BART rail stations, and helped address the “last mile” problem. I could pick up a Gig and drive to the Amtrak station, and leave it there; take it to the nearest trailhead; or grab one when the bus was running late. I was only charged for the time I used it, usually less than 30 minutes. For the next five years, I was an active user of Gig Car Share and I eagerly awaited its expansion to more cities, including around the Bay Area.

But behind this convenience were higher costs than Zipcar’s fixed model, due to the need to rebalance and move cars, refill gas, and perform other maintenance at dispersed locations.

“I think there was hope for a while that the cost issue could somehow be solved by technology, but at the end of the day, it’s a problem of geometry,” Murphy says.

Equity and access

For-profit car-sharing models have a fundamental challenge: They need to set prices high enough to at least break even. Often, that means prices are too high for those in low-income communities, who tend to have less access to cars and public transportation in general. Gig’s “home zone” was focused on the wealthier areas of North Oakland, Berkeley and Emeryville, and while it did expand to Fruitvale, lower-income parts of East Oakland and cities like Hayward never had access.

In contrast, Míocar, an electric car-sharing pilot currently operating in four California cities, has found success under a very different model, operating in places that Gig, Car2Go and others ignored.

“We place electric vehicle car-sharing where transit service is poor, and when there is a high density of people without vehicles,” says Caroline Jane Rodier, Associate Director of the Urban Land Use and Transportation Center at the University of California, Davis, a Míocar partner.

“We’ve found significant benefits. People are using these vehicles to address their unmet travel needs”

Supported by a grant from the California Air Resources Board, Míocar is operating more as a form of subsidized public transport. It’se also seeing high utilization rates, with cars sometimes booked months in advance.

“Without subsidies, it’s not going to work,” Rodier tells Next City. “In the best-case scenario, revenues are about 50% of the cost, and in worst-case, it’s 10%, and our average is 15%, which is better than transit in the area.”

This could point towards a new non-profit model for car-sharing, where the focus is on equity, access and climate benefits from reduced emissions and fossil fuel consumption.

Wilson also sees public models as one likely way that car-sharing grows in the future.

“In the long run I think it’s going to be only these companies where car-share is part of the vehicle revenue pipeline, or else community-based models that aren’t out to make a profit and that also have a reasonable claim to public subsidy or philanthropic money because they are actually providing a public service,” said Murphy.

Rodier also noted more potential for community-led, non-profit or state-supported car-sharing, focusing on addressing specific needs of communities, and utilizing electric vehicles.

“We’ve seen many communities interested in carshare recently, as it provides them with the efficiency of a car without having to take on the cost burden of car ownership,” says Hannah Wilson, senior director of partnerships and engagement at SUMC.

There’s a role for local and regional governments to play in this, especially if policymakers want to reduce car ownership, seen as critical to reducing emissions from transportation.

“If cities are really trying to reduce car ownership, car-sharing is the optimal way,” said Pam Cooley, director of the Car Sharing Association. “You can have micro and active transit, but there’s evidence that people won’t get rid of their cars unless there’s a car-sharing option.”

For now, community or local platforms like Miocar are likely to stick to the cheaper, easier-to-organize model of fixed-location car-sharing. It may be some time before free-flowing car-sharing returns to America, as the costs make it prohibitively expensive for these community-led programs.

But in other countries, free-flowing systems are still thriving. In Canada, Communauto operates a free-flowing system in several cities; in British Columbia, Evo has 2,500 predominantly free-flowing cars for rent, and the car-sharing co-op Modo offers about 1,000 vehicles for two-way trips . In London, Zipcar has a free-flowing system as well, in contrast to its fixed model in the United States.

One factor could be that car ownership is more expensive in Canada and Europe, making the costs of free-flow car-sharing more competitive. In the U.S., with low gas taxes, abundant parking, and numerous incentives that promote car ownership, it will likely take a total rethink to make free-flow car-sharing a truly viable alternative.

This story was originally published by Next City, a nonprofit news outlet covering solutions for equitable cities. Sign up for Next City’s newsletter for their latest articles and events.