On the eve of Zipcar’s IPO, with profitability riding on driving down the cost of their fleet of designed to be owned cars, it’s time to ask whether products should be designed to be shared.
Zipcar has shown that running a car-sharing business with traditional cars isn’t cheap. They’re the market leader with roughly 500,000 car sharing members, most of whom express zealous enthusiasm toward the Zipcar brand and experience. They’ve made car sharing aspirational and fun. With $186 million in revenue last year and membership booming, it’s hard to imagine they wouldn’t also be profitable.
But, in fact, they’ve never turned a profit. And they’re over $65 million in debt. When you look closer at the cost of providing the Zipcar experience, their debt makes more sense. The better part of its 8,000-car fleet is leased, and their high cost of operation is due mainly to the cost of the cars. Further, these expensive and high-maintenance vehicles are being turned over every two to three years.
Sometime this week, Zipcar is expected to go public in a $75 million initial offering. According to its regulatory filing, Zipcar will use the funding to help with general expenses and pay off debt. However, the company cautioned that they expect a loss in 2011 and couldn’t predict when they would begin to turn a profit.
(Via Beyond the Beyond.)