BMW Vs Zipcar! Zipcar Makes Zero Profit-Which Has the Better Business Model?

BMW M6 Rental

BMW Group has been busy not just developing some of the planet’s hottest exotic and luxury rental cars, but also with a new pilot project, aptly titled, ‘BMW on Demand’.  The project will allow customers to rent any current BMW model by the hour from the company’s event center in Munich, Germany.  This places BMW in a position to compete with other by the hour auto rental entities, like the popular Zipcar. 

Zipcar is a for-profit, membership-based car sharing company that provides car rentals by the hour or by the day.  Flexible auto rental and mobility companies are beginning to spring up around the world, as consumers demand more rental car and luxury rental car options.  The current hourly auto rental trend includes those who are willing to hire a luxury car rather than invest in one.  For example, for special occasions people are more willing to rent a BMW M6 or other BMW rental for an hour or a day than they are to pay the $102,350 price tag to own one.

The market stats are interesting for hourly rental cars.   As of 2010, Zipcar is the world’s mobility market leader, with approximately 400,000 members, 4,400 locations, 9,000 rental vehicles and 80% of the U.S. market.  I am not surprised that BMW would want a piece of that action!  Although, according to reports, the for-profit Zipcar has never actually turned a profit, making this even more sticky and interesting.  So who will have the better business model, BMW or Zipcar? 

Mini Cooper Rentals

BMW on Demand is obviously not going to impact Zipcar tremendously, as it will only be targeting the segment of customers who want a BMW rental by the hour or day, not the variety of other rental cars and SUV rentals offered by Zipcar. But the area hourly BMW rentals would impact Zipcar is the luxury car rental area, the area that provides the best shot at a profit.  According to Scott Griffith, Zipcar CEO, the BMW’s Mini Cooper is the most requested model in their fleet of hourly rental cars.

BMW on Demand will cover rental car insurance, cleaning and servicing fees.  In the spirit of competitiveness, BMW claims it will only charge renters for the actual use period, whereas Zipcar charges clients for the full reservation period, regardless of an early return.  As BMW is poised to discover if the grass is greener on the hourly rental side, I am curious to see if Zipcars will find ways to generate profit, and if BMW on Demand will manage to run over Zipcar in the profit arena.
Hourly Auto Rentals




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