By Sara Kehaulani Goo
Washington Post Staff Writer
Tuesday, September 5, 2006

For more than a year, Michelle Brown eyed the Zipcars parked across the street from her Penn Quarter restaurant. The co-owner of Teaism, a popular tea house, plotted and pondered and then, two months ago, she took the plunge.

Now, every morning, the chefs at Teaism prepare salty oat cookies and sandwiches and load them into a Honda Element owned by Zipcar so they can be delivered to the restaurant's two other District locations before noon. Brown figures the shared-car service saves her a couple of hundred dollars a month on gas and parking.

"I love getting in a car that's clean, that's new, that's responsive, that's well maintained and has gas in it," Brown said. "When my car was used for the runs, I'd get in my car and have lentil soup [spilled] in the back."

Brown is one of a growing number of business owners using shared-car services instead of their own vehicles. No longer a curious fad, the services boast 530 shared cars in the Washington area, making them increasingly attractive to new kinds of customers, including universities and businesses.

Within the past year, the area's two shared-car services, Zipcar and Flexcar, have both received $20 million in private investment that they plan to use to expand. Using their popularity among politicians and transportation policymakers, the firms are aggressively cutting deals with cities for parking and marketing promotions.

The companies charge an annual membership rate of $35 to $50, plus hourly fees of $7.25 to $9 to rent a car, which includes gas and insurance. Cars are reserved online or through a toll-free number, and each member is given a keyless entry card to access the car. Part of the appeal is that both firms offer a range of vehicles -- from high-end BMWs to pickup trucks to Mini Coopers. Many major cities have at least one company, but only the District and San Francisco have two firms vying for customers.

In time for the new school year, District-based Flexcar expanded its deal with the University of Maryland to allow students 18 and older to join. Before, the companies could not accept members younger than 21, but Flexcar said it reached agreements with its insurance companies to lower the limit. Zipcar, which has an arrangement with George Washington University, offers 17 vehicles on campus for employees and students over 21.

America Online co-founder Steve Case was behind the investment at Flexcar, which announced a new management team earlier this summer, including a new chief executive, Mark D. Norman, who hails from the auto industry. "The whole opportunity for growth is a great benefit to our members," said Norman, formerly chief executive of DaimlerChrysler AG's Canadian operations. "With the additional cars, the benefits of the network effect continue to snowball."

Within the past year, Flexcar doubled the number of cars in its D.C. fleet. Norman said that this year, he expects the pace to be just as fast, if not faster, as it expands neighborhood by neighborhood and into new cities.

Adams Morgan resident Aurelie Shapiro said she has been a Zipcar member for four years and recently noticed a huge increase in the number of cars available. "I used to complain on weekends that you could never find a car, especially in the spring when it's nice outside," Shapiro said. But in the past year, that's changed. "I noticed there's a lot more cars. They've added a ton more. There's one near my work in Silver Spring."

Both firms, which are privately held and do not disclose revenue, say they are more focused on expanding the business than on profitability, which is a longer-term goal.

Zipcar is profitable in all of its markets, said Matt Malloy, vice president of sales and marketing for the Cambridge, Mass., company, but he would not say how much it makes overall.

Flexcar has "a solid profitable business model applicable in different markets in different growth stages," Norman said. "We're about growing and expanding a profitable business plan." Profitability, he said, "is a longer-term horizon than next year."

Norman said that having both firms in the District helps build awareness of shared cars, which helps both companies. In this region, many Flexcar members are also Zipcar members, giving people access to more cars at a price that can be lower than buying a car and paying for insurance, gas and maintenance.

"There's been an evolution of the business," Malloy said. "There were definitely early adapters -- people who originally thought of this as a really green service. From 1999 to 2001, people were like, you had to be a tree-hugger. Now we're seeing this is becoming a true transportation category. The mainstream person is thinking about car-sharing as a transportation solution."

With the growth there has been some tension. Over the past year, residents in parking-strapped Adams Morgan complained about the city giving parking spaces to the two firms for free. Both companies have had to raise their prices slightly to adjust for higher gas prices.

Hard feelings still exist for some residents. In June, Flexcar asked about parking availability for more cars on a Yahoo group message board for the Adams Morgan neighborhood, sparking a fresh debate on the topic.

A posting by someone with the username Trudi Davis said: "Great, like there's so many extra parking spaces in Adams Morgan for those people who actually LIVE here. Why don't you rent space in a garage and let residents have the street? Your posting convinces me never to use or recommend zip cars."

Zipcar and Flexcar said they rent some privately owned spaces and use some free street spots. Both companies argue that their presence results in fewer cars on the streets, as many members say they have delayed a car purchase or sold their own cars. Citing internal and third-party studies, the companies say one shared car results in 15 to 20 fewer cars in the city.

Cleveland Park resident Susanna Beiser said she joined Flexcar a year ago when gas prices started to go up. She has put off buying a car.

"I'm not really one of the 'green' people who joined because of the hybrids. To tell you the truth, I don't love the hybrid," Beiser said. She said she uses the car service mostly to rent for the day or weekend and finds that it often beats the price of rental car companies.

"I wasn't sure whether I needed a car. I was using my car once week on the weekend and trying to decide, do I even need a car?" Beiser said. "I have not made that decision forever -- but for now."