Digital Matters - Issue 41

But it is the second-generation Model E customer experience that holds the greatest promise: custom-car building. What most people don't know is that companies like Magna can already build-to-order a Mercedes sedan (minus the emblem) and deliver it to your door next week. Model E wants to take that capability and customize cars for auto enthusiasts everywhere.

The second-generation Model E will be the "Model E brand." In this version, the base model will be cut not from an existing Audi or BMW design but from a set of template designs that the consumer can work with to build his or her own car. These template-design cars will be manufactured and assembled by Magna or by one of the other independent manufacturers in the marketplace. This is what car enthusiasts have been anxiously awaiting for years.

If Model E can win over the special-vehicle customer niche, then it can become a very profitable business. After all, the margins are highest at the top end of the market. Once established, the Model E "customer experience" could become the industry standard. And just as "luxury cars" became affordable in the 1990s for millions of customers, special Model E cars might well become the status symbol of this decade and of the next. All of which would require the incumbent car companies to fight for what they now consider to be their sacred turf.

In the middle and lower echelons of the market, a Model E car simply isn't affordable. Indeed, for many of the people who are part of these customer segments, any kind of second car is a financial stretch. So what's the average family to do? He works, she works, and maybe one or two of their children have a driver's license. They have no choice. They need to have a second car -- maybe even a third one (with all of those fees piling up on top).

A company being incubated at MIT called Zipcar Inc. has a different idea. Robin Chase, Zipcar's cofounder and guiding spirit, asks a break-the-mold question: Why not put a car on every block, in every neighborhood, and in every major metropolitan area? Why not have a membership club that allows people to walk down the street and drive off in a Zipcar? Why not create a car utility?

Zipcar is the best thing to come out of the Boston area since Pedro Martinez. It's a remarkably simple concept. You pay a fee to become a Zipcar member. You offer up your DMV data (you are denied membership if you have had two or more moving violations in the past three years) and a credit card for direct billing. If you are accepted as a member, you are required to attend an orientation. After that, your Zipcar passkey card is mailed to you. Then you go online and reserve a Zipcar for however long you might need it on whichever day you choose.

Next, you walk down the block, wave the passkey in front of the Zipcar door, open it, and drive off to your destination. When you're done, you just return the car to its designated Zipcar parking space (either on the street or in a municipal lot).

Along the Red Line MBTA-station stops in Cambridge, there are Zipcars parked within a block or two of every exit. Robin Chase is planning an aggressive expansion program over the next year, adding cars and parking spots and signing up commercial real-estate operators and universities so that they can make Zipcars readily available to their customers and staff members. A number of parking spaces have already been designated at MIT as "Zipcar-only" spots, and Chase hopes that eventually, every neighborhood in Boston will have Zipcars on every corner.

In its first three months of operation, Zipcar gained 20 to 30 new members each week. It now has nearly 400 people sharing its cars around Boston. Assuming that it can manage a fleet of cars and that it can convince local and state officials to provide more Zipcar parking spaces, it's possible that Zipcars will be all over Boston within two years. And the beauty of it is that there are no marketing costs: Zipcars sell themselves whether they are zipping around town or they are parked.

The value proposition that Zipcar (along with CarSharing Traverse Inc. in Traverse City, Michigan and Flexcar in Seattle) has to offer is a compelling one: The company provides a large customer base with access to 1.4 cars. Each customer would buy or lease one car for his or her own personal use. Then, as an inexpensive add-on, a Zipcar would be available at his or her convenience. For corporate customers, the cost savings of Zipcars are compelling. At the very least, replacing car and taxi service with Zipcars would dramatically cut personnel-transport costs for travel to and from meetings. State and local governments are also highly motivated to adopt the Zipcar model, since it reduces air pollution and traffic congestion. More and more people would use public transportation, knowing that a Zipcar would always be available to fall back on (which would be especially appealing to working parents who would need quick access to a car in the event of a child-related emergency).