Back in 2018, I wrote about the fundamental flaws in the dominant carsharing models of the day – Zipcar and Getaround. Specifically;
- Renting out a car multiple times a day is more costly than just once a day. The costs of cleaning a car multiple times alone, made the economics unfeasible.
- The cars had to be scrupulously clean and well maintained. Therefore, the owners had to have strong incentives to care for their car. There simply was no market for renting out jalopies to the mass market
- Their pricing models disincentivized use. Customers were bad at predicting their journey lengths. When they got fined for late returns, they got angry.
RelayRide, founded in 2010 ran into many of the problems themselves including famously getting kicked out of New York state for trying to cut corners with state insurance laws. They revamped after a 2015 name change to Turo and seem to be hitting their stride after an equity infusion from Barry Diller’s IAC.
The second coming of Turo is a simple and elegant iteration on the carsharing business model.
By focusing only on high end cars, they target a luxury clientele which is willing to pay a higher price. As a result ticket sizes are high, often up to $200 a day. Even when rented for smaller time periods, the prices are high enough to make up for the costs.
Furthermore, while Turo allows rentals by the hour, it only calculates the price at the end of the ride. A driver never feels a last minute rush to return the car before their hour is due. They are thus not forced to skip traffic lights on engage in other aggressive driving. Furthermore, only free inventory is available for a new rider ensuring that no rider is kept waiting for a previous ride to finish.
Moreover, given the high end nature of the fleet, often Teslas, Maseratis and Mercedes, owners were significantly incentivized to take the extra time to keep the car well maintained, cleaned and in good shape. Given the already high ticket price, customers are open to paying a bit extra for cleaning if needed.
They are clearly committed to the touchless rental experience by allowing cars to be unlocked and started by buttons on the App. Cars may often be keyless but also geofenced, lending to greater security with theft and damages. On the flip side, their addressable fleet supply is limited to recent vintage vehicles with Connected Car capabilities. Once again, given their high end target segment, they can afford this constraint.
Albeit, their iPhone app is still clunky. It is a minefield to find out the location of a car and can be a hassle to communicate with the owner over unpaid tolls. But those are solvable problems. I have found the app getting better everytime I go back for my next ride, demonstrating that Turo is on the improvement curve.
What Turo has achieved is de-commotidizing car rental. By focusing on a specific segment that wants to try out luxury cars, they have carved out the most profitable segment in Carsharing. Their market sizes will never rival Uber or Revel. They will also remain consigned to high end areas, perhaps the suburbs of megacities. But they will deliver much higher margins and have loyal customers. Definitely a winner.
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