What Are Challenges to Green Rental Cars?

While carving a niche through eco-friendly car rentals, these companies face numerous challenges, such as higher initial costs and keeping rates competitive to worrying about fluctuating fuel prices and competition from the majors.

In 2007, ARN published an article titled “The Greening of the Auto Rental Industry,” which took a look at the business of renting environmentally friendly vehicles from the perspective of the independent operator.

Five years later, we catch up with the players in that story, visit with new ones and take stock of the present market for green rentals at non-major car rental companies.

Then and Now

In 2007, EV Rental Cars laid claim to being the first car rental company in the U.S. to rent only environmentally friendly vehicles to the public.

Started in 1997 in Los Angeles, the company offered the first generation of electric vehicles (EVs) for rent such as General Motors’ EV1, the Toyota RAV4 EV and the Ford Ranger EV along with the first hybrid models. EV Rental Cars’ parent company, EV Transportation Inc., went public while having the backing of high-profile industry veteran Bill Plamondon as its chairman and CEO. The company built a fleet of more than 400 cars serving six locations in California and one in Phoenix, Ariz. before closing its doors suddenly in 2009.

San Francisco-based Bandago Van Rentals, specializing in van rentals to touring musical acts, is alive and well. Bandago gained publicity in 2007 by claiming to be the first auto rental agency to be completely carbon neutral by purchasing carbon credits to offset the carbon output of it’s fleet and offices.

“Our green initiatives have been well received, and we continue to make positive changes,” says Bandago Owner Sharky Laguana. “They don’t really translate into direct measurable revenue, but they are the right thing to do. While some of the initial efforts might have been a little ahead of their time, the ones who do it now, and do it right, will likely reap rewards in the future from that positive association with their customers.”

On the car sharing front, Flexcar was absorbed by Zipcar a month after the green article was published. Zipcar has grown to be the world’s largest car sharing company and has started an EV pilot program in Chicago and a municipal EV fleet sharing program in Houston. Zipcar rents green models such as Honda Fit EV, Toyota Prius Plug-in Hybrid and Chevrolet Volt.

Zipcar went public in 2011 but has yet to make a profit — at least as of its 2012 second quarter earnings report.

Bio-Beetle’s Nissan Leaf gets charged by a DC Fast Charger at the Kalana O Maui Building in Wailuku, Hawaii. A first for Maui, DC Fast Chargers will charge a Nissan Leaf battery from depleted to 80% capacity in about 30 minutes. The Fast Charger is free to users.
Bio-Beetle’s Nissan Leaf gets charged by a DC Fast Charger at the Kalana O Maui Building in Wailuku, Hawaii. A first for Maui, DC Fast Chargers will charge a Nissan Leaf battery from depleted to 80% capacity in about 30 minutes. The Fast Charger is free to users.

On the Hawaiian island of Maui, Bio-Beetle keeps chugging along using biodiesel made from salvaged vegetable oil from local restaurants. The company, which opened in 2003, rents VW Jetta and Beetle diesel models, and renters can use the same local station to fill up. The website is still folksy and rental quotes are still given manually.

Loyal repeat customers make up much of the business, which hasn’t grown appreciably. “If you’d have asked me 10 years ago if we’d only have 17 cars today, I’d have thought you’d be crazy,” says owner Shaun Stenshol.

Biodiesel is cheaper in Maui than regular diesel. Yet an expiring federal tax credit of $1 per gallon at the end of this year might not be extended, which keeps a question mark on biodiesel fuel prices.

With an environmental focus, Stenshol says it’s hard to compete with a $75-a-week economy car special from one of the majors. A weekly rate of $199 for a biodiesel Jetta is as low as he’s willing to go. However, a year ago he moved from set rates to scaling prices for his green machines based on the competition and then added a reasonable premium. That translated to a smaller rate disparity margin than the majors, which has kept more cars on rent.

Today, Stenshol is catching the wave of EVs and has gotten pragmatic about aligning business decisions with government initiatives and manufacturer deals.

The state of Hawaii, a leader in green initiatives, now requires parking lots with 100 or more parking spaces to have at least one EV charging station. While implementation is slow, charge ports are coming online at hotels and retailers. DC Fast Chargers — which can fully charge an EV in as little as 30 minutes — have arrived, including ones at the entrance to Mt. Haleakala and the famed Road to Hana.

Stenshol took advantage of favorable lease deals to acquire a Nissan Leaf and Chevy Volt. In deference to the new trend, Stenshol has officially renamed the company Bio-Beetle Eco Rental Cars.

With a new focus, Stenshol is upbeat about the future: “Overall [the business] is moving in a good direction because it’s not just biodiesel now; we’re about offering the greenest cars available.”

CONTINUED:  What Are Challenges to Green Rental Cars?
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