Making A Business of EV Rentals - Part 1
By Bill Moore
In every vision there must be a measure of pragmatism. The trick is to keep the dream alive while dealing with the bottom line realities of the business world.
So far, EV Rentals has managed to do both as it introduces its clean vehicle's business model to airports on the American East Coast. Curiously, it was on an airline flight back into Los Angeles that company founder, real estate developer Jeff Pink, came up with the idea for EV Rentals. Terry O'Day, the firm's vice president for business development explained to EV World the genesis of the company.
Pink was returning from a trip to Hawaii when "he looked over the layer of smog that sits over the LA basin and decided at that point that he wanted to do something that would be beneficial for the environment." So according to O'Day, the real estate developer gave up his twenty year career in real estate development to begin a rental car company using electric cars.
O'Day was working at Edison EV in strategic planning and business development when Pink arrived, asking for advice on getting his idea off the ground. It was O'Day who explained to his future boss that he'd need the backing of a major rental car company to get his business off the ground, conceptually speaking. He also said Pink would need some public funding to help finance the idea because EVs were more expensive than normal cars.
"So about a year later he was buying GM EV1s, the Gen Ones from my wife who was an EV1 specialist at the time. . ." The company officially opened for business December, 1998 with eleven electric vehicles, nine EV1s and two Ford Ranger EVs at Los Angeles International Airport under the Budget Rent-A-Car banner. Within five months, the company had added the Honda EV Plus and the Toyota RAV4 EV. By the end of the year, they had added the Nissan Altra.
Today the fleet make-up of EV Rental differs considerably from what Jeff Pink and Terry O'Day originally envisioned. Electric cars are still available in at California locations, but the majority of the cars either use compressed natural gas or are SULEV-class gasoline vehicles.
There are now a total of 250 cars in the fleet including 135 CNG-fueled Honda Civics and Ford Crown Victoria's, 53 SULEV Nissan Sentra CAs, 35 battery electric cars. The remaining 27 cars are hybrid-electric Toyota Prius and Honda Insights.
Budget Backs the Notion of EV Motion
Budget Rent-a-car is one of the largest car rental (hire) companies in the United States. It has offices on or near most major and mid-sized airports. To EV Rental's good fortune, Budget is also one of the more innovative in the business. O'Day says that its larger partner specializes in niche and specialty vehicles with some 35% of their fleet consisting of everything from Ford Rangers to Jaguars renting for $350 a day. Budget's slogan is "Get Out of the Ordinary."
"We figured no cars applied better than our electric cars," O'Day said. "So, Jeff approached Budget and Budget was interested." Under terms of the agreement worked out between the two firms, Budget provides most of the actual airport rental car services. "Probably some of our renters don't even know they are renting from EV Rental Car. Some of them probably think they are still with Budget."
"Their staff will rent the cars, prepare the car on the lots by washing and cleaning it. They will also take your reservation. What we do is we typically have an on-site manager that will oversee the process for a particular airport location. Then we also customize the rental process for our vehicles in our company. So our staff will come in and provide training for the Budget staff. We'll also install chargers as necessary. Set the fueling stations for natural gas vehicles or whatever else is required to fuel them. And in every way [we] try to streamline the process cars fit and are easy for budget to rent alongside their vehicles."
Obviously, given the shift from pure battery electric cars to hybrids, CNG and SULEV vehicles, means the company name has had to undergo a similar transformation
"When we founded the company we thought we'd be doing just electric cars," he explained. "And in December of '98 that looked as if it was possible. But shortly thereafter it became clear that the volume of cars needed to run a successful rental operation would just not be available from the major automakers.
"So by April of '99 we diversified into the natural gas vehicles and found those to be more available from the automakers and the automakers more willing to work with them. And so to rectify the situation with our name and our brand image we refer to EV Rentals as environmental vehicles."
Getting Out the EV Word
While the company isn't strictly a battery EV rental company any longer, it still tries to educate the rental car public about the virtues of driving cleaner, less polluting motor vehicles. It's starts, said O'Day with signage on the airport shuttle bus or in the rental lot.
"That signage should give you a heads-up that we have cars. [It] probably won't convey all the benefits; just let you know that you have an environmental option here to get your wheels turn to think about it. Once you get on the lot, you will likely see one of our cars on display and then once you get to the rental counter, the rental agent will pitch you on the car and that's when you talk about the benefits and features of the car. Specifically, that's when you get to have your first set of misconceptions about the technology dispelled, because when people today think... about electrics or environmental vehicles, they think about performance constraints, they think of golf carts. So our rental agents whom we've trained on the features and selling points of the car will let you know that these are cars that are every bit as practical and perform, in many ways a lot better than gasoline-powered cars. And then they will sell you on the special benefits of the car.
"For example in California, Arizona, Virginia and Georgia you are able to take your electric or natural gas-powered car into the carpool lanes when you have just one person in the car. That's a really useful feature for business travelers," O'Day commented. "The opportunity to drive in a carpool lane and save yourself time is a real selling point at the counter. In addition, we allow you to take the car without having to refuel it before you return it."
O'Day pointed out that in the case of the electric, it is not possible for the renter to refuel the car prior to returning it. And for those who rent a CNG vehicle, it would be difficult for them to find a CNG refueling station, so the company doesn't require refueling prior to return, either. These are strong selling features, he said, and combined with being competitive on the actual rental rate, often entices customers to go with the cleaner option.
Of course, in the case of a battery electric vehicle like the EV1, there are some operational constraints, in particular the issue of range. O'Day told EV World that every customer who takes out an alternative fuel vehicle is given an orientation prior to driving away with the car.
"In addition to needing to know about the limited range, you need to know how to drive the car and many of the cars, some of the features are not always intuitive. So, the on-site EV specialist for EV Rental Cars will go out to the car with you and take you through it. Depending on the car it takes anywhere from five to ten minutes. And we'll give you a book with a map of the all the changing stations within the area. So, we'll help you plan your trip so you understand where you're going and how to maximize the range of the car by driving efficiently."
Succeeding on EVs Alone?
We asked O'Day whether or not the company could succeed renting battery electric vehicles alone, assuming carmakers continued to build them in sufficient numbers.
O'Day responded that while he would like to think so, he can't be sure. He admitted that based on the current rate of utilization in the fleet, battery electric cars are simply not being rented at a frequency that would let the company be profitable. He said that he had originally estimated a conservative utilization rate, but that in fact, the cars are being rented even below that number. The public funding the company received to help launch the business and make up the cost differential wasn't enough to cover the shortfall, he added.
"I think we were also betting on advances in the technology," he said. One of the biggest advances EV Rental Cars was counting on was fast charging.
He explained that when a renter returns a battery EV, typically around 8 AM in the morning, the car will be out of service for, often as much as 4 hours or more while it is being recharged. This means the car can't be returned to service until the early afternoon, as which point, it has missed the morning rental rush of incoming business travelers. This, in effect, takes the car out of service for the entire day, accounting for the lower than expected utilization rate.
Fast charging, O'Day believes, would let the car be returned to service within the morning rental window and improve the utilization rate. By comparison, a conventional vehicle can be serviced, including cleaned and washed, and returned to the rental line in as little as 20 minute. CNG-fueled cars take about 30 minutes longer to service because they have to be taken off site - - usually about a mile or so - - to be refueled.
In the two years the company has been in business, O'Day estimated they have rented battery EVs to somewhere around 3,000 customers, a good rate, but no enough to stay in business.
CONTINUED NEXT WEEK...
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