Zipcar Grows, But Has Yet to Make a Profit

Fueled partly by high prices at the pump, Zipcar membership this year is on pace to grow 80% over 2007, to 300,000 members. But the car-sharing company has yet to turn a profit since it was founded in 1999, according to BusinessWeek.

A quick look at Zipcar would make you think things are going great for the privately held company. Since Zipcar was founded, it has expanded into more than 50 cities. The company expects to make about $100 million in revenues this year, up from $60 million last year.

But the Zipcar won’t be in the black until 2009, at the earliest. The company’s all-in-one price scheme leaves it vulnerable to volatile fuel prices and other costs.

Looking to expand its customer base so it could more broadly distribute its operating costs, Zipcar merged last October in a stock swap with Flexcar, a West Coast competitor backed by AOL co-founder Steve Case. The deal gave more geographic reach to Zipcar and lowered its per-car overhead. But expanding into new markets is costly, and saps income from already profitable older cities such as New York.

Long term, Zipcar’s biggest worry may be competition from giant car rental companies, which have begun to clone Zipcar’s approach. Hertz is offering hourly rates, gas included, in New York and Boston. And privately held Enterprise launched a similar program, WeCar, in St. Louis, which could go national.

Various nonprofit and public-sector startups are also experimenting with car sharing, some of them with ties to municipal transport agencies. In Chicago, a nonprofit civic group started a venture called I-GO Car Sharing, with backing from the city and the U.S. Transportation Department.

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