A colleague forwarded me the email with the subject “You're invited to try a new service from Lyft.” This isn’t surprising, as Lyft has launched myriad initiatives, from partnering with bikeshare and autonomous shuttle services to launching e-scooter programs and giving discounts to riders to get them to the polls on election day.
For that reason, I took my time to open the email. But when I did, I found out that Lyft is piloting a daily rental service. “Introducing Lyft Rentals,” read the HTML, which went on to say that the user could “rent a car for a weekend getaway, for running errands, or whenever you need a set of wheels.”
So yeah, Lyft is now a daily rental company, in two locations at least: one in the Mission District in San Francisco, the other in West Oakland. (There are no plans — yet — to expand the service to other areas.)
Users in these areas can rent a car through the home screen of the Lyft app. According to the FAQ, Lyft can’t yet process payment methods or credits stored in the app, though “this will be available in the future.” For now, renters will need to input a credit or debit card at the time of booking.
Though app-based, the rental process seems fairly standard. Lyft will authorize a $200 security deposit at the rental branch and charge incidentals (fuel fees, excessive cleaning) upon return. Additional charges, such as tolls (the vehicles have transponders) and violations will be added within four weeks.
Yet the new service comes with some enticing goodies: Renters can take a free Lyft to get to and from either rental location, up to a $20 value each way. Upon return, Lyft will fill up the tank for you and charge you the local market rate. Mileage is unlimited.
Lyft offers a collision damage waiver (CDW) — with no deductible. The fleet consists of only two vehicles, albeit nice ones: a VW Passat sedan and a VW Atlas SUV.
While the FAQ answers some questions, the mind races to figure all this out.
From a geeky industry insider standpoint, this is kind of a big deal. Lyft, a pioneer in the asset-light, peer-to-peer model, now owns a fleet. Is this the green shoots of a diversification strategy, a nod to the long-term realization that getting around won’t happen in personally owned vehicles?
From a growth standpoint, the initiative makes sense. Ride-hailing companies are looking to — or need to — expand into other modes as the larger transportation ecosystem continues to shift, even for upstart transportation network companies like Uber and Lyft.
From a customer standpoint, the service sounds awesome. They’ll pick you up and bring you to the lot and home for free, and fill up the tank without charging a premium? And you can drive a VW Atlas, which is pretty close to a luxury three-row SUV? Sign me up! If Lyft can integrate the rental charge seamlessly into the app, they’d notch a big customer experience win.
Which brings us to the business model standpoint — can Lyft cover all these goodies with a rental rate that will allow for a profit margin?
Lyft is paying its contracted drivers to get renters to and from the rental lot, as well as paying someone to fuel up the cars. Rental operators know how labor and cost intensive these processes are.
And a zero-deductible CDW will come back to bite you when the minor scrapes occur with some regularity.
Who is supplying the fleet? Lyft has partnerships with Avis, Hertz, and Flexdrive to provide Lyft drivers with wheels. But neither Avis nor Hertz would supply vehicles to a competing daily rental service for consumers. Flexdrive, which partners with local dealers, may factor into this equation.
Does Lyft want to get into the game of depreciation and buying and selling cars, or will they let a third-party (Flexdrive) handle that? Of course, Lyft has a lot of clout to hire the right people to run its rental division, and apparently already has.
I’m sure they’ll avoid losing 9,000 per car, as Uber did when it owned a fleet.
The thing is, profitability does need to be part of the equation right now. Lyft just needs to “surprise and delight” to gain traction and go from there. Yes, Lyft is now a public company, so there will be more scrutiny on these types of initiatives moving forward. But right now, Lyft can afford to offer low rates while absorbing higher costs.
This presents a scary proposition to incumbent neighborhood rental companies that are not awash in investment capital and that are dependent on profitability. However, new competition is always a good thing in the long run, as it forces all market players to take a hard look at their customer experience and processes and hone them.
We’ll keep an eye on where Lyft takes this. In the meantime, welcome to daily rental!