In Hard-Hit California, Personal Car Sharing is a New Revenue Stream
As of Jan. 1, when a new law signed by Gov. Arnold Schwarzenegger goes into effect, car sharing in California will become a benign free-for-all. In addition to corporate programs fielded by companies like Zipcar and Hertz Connect, people will be able to form their own car-sharing cooperatives, using their personal cars, without fear of huge insurance liabilities. I think it's great, and a potential great boon to car-owning people trying to make ends meet in straitened times. But I still wonder how it will work when a poorly maintained car somehow slips through the safety net and causes in an accident.
Schwarzenegger signed Assembly Bill 1871, which was unanimously approved in the legislature, on September 29. The bill, which benefited from a big push from environmental groups popular in California, such as the Environmental Defense Fund and the Sierra Club, removes the major impediment to personal car sharing -- insurance rules that meant getting paid even a small amount of money for the use of a private automobile voided policies. The law also ensures that car owners are not held liable for losses arising from loaning out their cars, but that doesn't totally ensure it won't get messy.
"Owning a car can be expensive," said Dave Jones (D-Sacramento), the assemblyman who proposed the bill. "The new law will help car owners shrink the cost of owning their vehicles."
The law will initially most benefit the personal car-sharing service proposed by the new Spride Share and the nonprofit City CarShare, an existing service in the San Francisco area with 13,000 members. The parties wasted no time in getting their service off the ground: serial entrepreneur Sunil Paul said he was "thrilled" and promptly enrolled his own Toyota Highlander Hybrid in the pilot program to be launched early next year. California is "reinventing automobiles as a shared service," Paul said.
Personal car sharing makes sense as the next step in what has become a very popular service. Zipcar, the largest car-sharing player, has been expanding rapidly. It absorbed its largest rival, Flexcar, and acquired competing services in Europe. Municipalities, including Hoboken, N.J., have launched their own car-sharing services, and automakers, including Daimler, are offering them, too. WhipCar, a London-based service, is the first international player to offer personal car sharing.
It may take a little while for other players to get off the ground in California, but Spride and City CarShare have already launched with a small pilot program. It should be able to ramp up quickly to all CarShare members with a modified version of the existing program, which allows drivers to make reservations on the Internet or through mobile phones. Car owners will install a piece of hardware resembling a toll transponder so their vehicles can communicate on the system.
Helping people share, rather than own, cars is a laudable environmental goal, but people are just as likely to be motivated by money: Spride Share says that someone renting out an average sedan (which sits idle 90 percent of the time) for 20 hours a week could clear $4,000 a year, and luxury cars will fetch more (up to $7,200, the company says).
The insurance thing nags at me, though. Of course, the players have thought of this and Spride Share is providing a supplemental policy that covers both players (owner and sharer) as well as the car itself in the event of an accident. But the claims process could get a bit complicated. Will there, for instance, be a review process to make sure that cars in the program are properly maintained? That's much easier for centrally located fleets.
There are some other issues: If a driver commits a parking violation while borrowing your car, the ticket will be written for the owner of record -- you. But Spride Share says it will pay any such tickets "and collect the money from the responsible party." Good luck with that. Owners have to pay attention and notice any new cuts or scrapes, too, but the supplemental insurance pays for it.
Still, the insurance industry appears supportive of the law -- it's unlikely it would have won unanimous approval without such support, and appropriate safeguards in place. Personal car sharing, it could be the start of something big -- and a much-needed way for people whose cars are just sitting there to make some money.
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Photo: City CarShare