In a move that could alter the way cars are rented, General Motors Co. is launching an innovative service that will allow GM auto owners to put their vehicles up for short-term rental.
GM is teaming up with a small San Francisco company to offer private-party, or peer-to-peer, auto rentals using the automaker’s OnStar vehicle communications system. The OnStar system would be combined with a mobile phone application to match owners with renters.
The service, expected to start in Northern California early next year, reflects how online commerce is moving beyond purchasing music, books and consumer goods.
“This is very similar to what we see happening in both the vacation-home rental business, and now some folks even renting out space in their own homes. The Web is allowing for greater utilization of fixed assets and creating some exciting new business opportunities,” said John Boesel, chief executive of Calstart, a clean-transportation technology organization in Pasadena.
On average, cars are used less than two hours a day, leaving lots of opportunity for short-term rentals, Boesel said.
It is part of a trend known as “collaborative consumption,” said Bob Tiderington, GM’s manager of new business development.
In this venture, subscribers to GM’s OnStar service will be able to list their vehicle as available for rent through a program operated by the San Francisco company, RelayRides. The owner sets the price, which averages about $10 an hour, and supplies the gas. RelayRides takes a 35% cut and supplies a $1-million insurance policy.
Renters search RelayRides’ website for available vehicles in their area. When they make the reservation, RelayRides uses global positioning technology to transmit the exact location to the client. When the renter gets to the car, he or she uses a smartphone application or series of text messages to unlock the vehicle and find a key hidden inside.
At the end of the time slot, the renter returns the car to the location and locks the key back inside the vehicle.
A law passed by the California Legislature last year allows such rentals if the annual revenue received by the vehicle’s owner does not exceed the yearly expenses of owning and operating the car, including such items as interest or lease payments and depreciation.
The GM-RelayRides partnership will roll out first in Northern California next year. Both companies are hoping they will be able to expand the service to other markets after that.
RelayRides, founded last year, brokers about 5,000 rentals a day between its two markets, the San Francisco and Boston metropolitan areas, said Andre Haddad, a former EBay executive who is the company’s chief executive.
The company’s growth has been limited by its difficulty in finding owners willing to rent their cars.
“It is not super easy to sign up with us,” Haddad said.
Owners who register with the company must schedule a time to have an electronic device installed in their vehicle at RelayRides’ expense. The device keeps track of the car and enables the doors to be unlocked through mobile phones.
OnStar will do the same without having to modify the car’s electronics.
“It makes the GM car owner who has an OnStar subscription just a click away from becoming part of the RelayRides’ marketplace,” Haddad said.
GM has about 6 million active OnStar subscribers nationally and an additional 9 million vehicles on the road that have the system — which automatically reports crashes and provides other services — but whose owners don’t subscribe. Subscriptions start at $18.95 a month.
There are a handful of private-party car-sharing companies operating in the U.S.
One company, Wheelz, focuses on peer-to-peer car rentals on college campuses. Getaround competes with RelayRides in the San Francisco Bay Area. Other car-sharing companies such as Zipcar Inc. own the cars they rent and operate like a traditional car rental business.
“Peer-to-peer car sharing is in its infancy. We don’t know if it is going to work or not,” said Stephen Girsky, GM’s vice chairman for corporate strategy and new business development.
GM thinks such a car-sharing program might help it gain more access to buyers in California, where it lags behind import brands in market share and younger buyers.
The automaker has found that younger drivers don’t like to go to car dealerships, even when they are curious about cars.
“This can be a hassle-free test drive. Let’s say you always wanted to drive a Volt or a Corvette. You can rent it and drive it for a few hours or a day just to see what it is like,” Girsky said.
Such a service appeals to Molly Nussbaum, a 22-year-old who works for an independent film distributor in Manhattan and doesn’t own a car.
“I’d totally do that,” Nussbaum said. “Even here in New York, to use something to go to the beach for the day, or even an ambitious grocery store run, having access to hourly- or day-rate cars that are cheap would be great.”