For those who don’t want to own cars, but benefit from occasional access to them, a growing transport option is proving handy—carshare. This is a form of car rental that allows payment for cars by the minute or hour, and for short trips, rather than per day as with standard car rentals. Carshare is a way to help the environment, reduce congestion, and lower household costs. How does this nascent market currently work, and what can cities do to bolster it?

Worldwide, the industry is worth $2 billion, and is projected to have a compound annual growth rate of 20% in the next six years. In 2014, reports AutoRental News, there were over 19,000 shared cars and over 960,000 carshare participants in the U.S. By 2025, the number of customers is expected to surpass 35,000,000. Outside the U.S., China, Malaysia, and Singapore are growth markets for carsharing.

It would seem, then, that local and state governments would want to plan for carshare, above all for the sake of keeping pace with this shift. But the case is especially strong when considering carshare’s social benefits. Environmentally speaking, it reduces car use. A study by the National Conference of State Legislatures finds that in five cities, customers of one provider, Car2Go, cut their total miles driven by 6-16%, while reducing their carbon output by up to 18%.

Regarding household savings, a study by the Victoria Institute for Transportation Policy stated that “households that share rather than own a car can reasonably save $500 to $1,500 per year.”

But the main appeal from carshare may be its ability to reduce congestion and free up urban space. After all, if a community can get around on a shared set of cars that are easy to find around their neighborhoods, it means fewer people having to drive and park their own vehicles.

Carshare in the U.S. has been a somewhat concentrated market. According to AutoRental News, 95% of the market is controlled by four companies: Zipcar, one of the first entrants, Car2Go (renamed Share Now following a merger), and subsidiaries of Enterprise and Hertz. Several dozen startups are also trying to enter the market. Companies typically operate on a “station-based” model, meaning cars must be picked up and dropped off at fixed points.

But another model, peer-to-peer carsharing, is gaining prominence (with its valuation projected to climb over $7 million by 2030) and could lower the barrier to entry. Rather than having a central provider own vehicles, companies such as Turo and Getaround act as facilitators connecting clients to cars owned by independent parties.

For all the industry’s growth, the current mode share of carsharing is still under 1% worldwide. But there is room to improve this, and it starts with more acceptance from governments.  

There have been disputes over regulation between state governments and conventional rental firms on the one hand, and “peer to peer” carshare firms, regarding insurance. In Maine, a law was passed that carsharing supporters had argued would shutter the industry by creating substantial insurance burdens. Turo slammed the law, calling it a benefit to conventional rental companies; while a car rental association spokesperson said it was simply a leveling of the playing field. CentralMaine.com, however, reports that later legislation was more favorable to P2P operators. New York’s insurance laws effectively prohibit Turo’s business model.

Another impediment is high tax rates. According to the NCSL, peer-to-peer services incur the same tax rates as conventional rental cars, which are typically rented for longer periods of time than shared cars; Fresno, CA, for instance, taxes hourly rentals at a 62% rate. As DePaul University researchers found, “nearly a quarter of the country’s 40 largest cities impose retail taxes that increase the costs of a 1-hour carshare by more than 30%.”

But the main barrier may be curb rights. Carshare will not feel truly accessible until it has reached block-by-block ubiquity in America’s densest cities. That way people who don’t own cars can still be within walking distance of rides. But this is now tough for carshare providers to achieve, because curb space has been locked off in favor of free storage for private individual car owners.

Still, some jurisdictions want to facilitate carsharing. Eight states are working on regulatory frameworks for peer-to-peer operators, according to NCSL. In New York City, a two-year pilot in conjunction with Zipcar and Enterprise CarShare converted 285 parking spaces that were used for free parking into carshare pickup/dropoff stations. The final report on the program found that despite market disruptions caused by COVID, including Enterprise CarShare shutting service down, “trip rates and unique users increased, blocked space reports decreased, and member surveys found that carshare use led to decreases in a member’s vehicle miles traveled and greenhouse gas emissions.”

The city’s DOT plans to implement a permanent program, allocating curb space for carshare in underserved low-income areas, as the pilot did.

This is a start. But hopefully cities nationwide will consider allocating far more curb space than even New York City did, charging market prices for that space. That would be the best way to help carshare take off, especially as the market shifts from the station-based model to a more dynamic pick-up, drop-off one.

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