Zipcar Offers Rides in Plug-In Prius -- and Feedback for Toyota

Car-sharing networks, which have gained popularity and attracted private equity investments, can provide a testing ground for newly developed electric cars. That's the idea, anyway, behind a program by Zipcar to add eight Toyota (TM) Prius plug-in hybrids to its fleet.

Zipcar is offering the hybrid electric vehicles in San Francisco, Portland and the Boston area. They're among 160 of the new plug-in hybrids that Toyota has made available for field trials in the country. The automaker plans to start selling them to consumers in 2012.

Unlike the regular Prius, the plug-in model comes with a larger lithium-ion battery that's charged from an electrical outlet. A larger battery will enable the car to go farther using a "fuel" with lower carbon emissions than gasoline. A growing number of automakers have launched or plan to bring to market plug-in hybrids or all-electric cars. General Motors (GM) and Nissan leaped ahead of the pack last year with their own: GM with the Chevy Volt and Nissan with the LEAF.

Zipcar, based in Cambridge, Mass., claims to operate the world's largest car-sharing network, which includes 530,000 members and 8,000 cars in the U.S., Canada and the U.K.

Zipcar bought out its competitor in Seattle, Flexcar, a few years ago, and it has also proposed to buy the London-based Streetcar. Further, Zipcar has invested in Spain's Catalunya Carsharing, and a recently extended agreement would allow it to take a majority stake in the Spanish company.

How Does Zipcar Work?

Zipcar operates differently from a conventional car rental agency. You have to apply online to join. After approval, Zipcar sends you a "Zipcard" that you wave in front of the windshield to unlock the car you reserved. Reservations can be made online or by phone and in increments of hours. Zipcar charges its members an application fee, as well as hourly or daily rates for the car. The price covers insurance and gas. The car-sharing network primarily serves urban areas and college towns and appeals to people who don't want to own a car.

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Toyota hopes to get driving data and customer feedback from its trial program for the plug-in Prius. Drivers can go up to 62 miles per hour for about 13 miles on a fully charged battery. After that the car relies on its gasoline engine and can achieve about 50 miles per gallon. The Prius will take about three hours to charge on a 110-volt outlet.

Zipcar says the short electric mileage shouldn't deter members because many of them typically travel less than 13 miles each time. The company already offers about 1,000 regular hybrid cars in its network across three countries.

Car-sharing has gained popularity and spawned new businesses. Some of them, such as RelayRides and Spride Share, take a different approach by setting up a network of car owners who rent out their own vehicles.

Market research firm Frost & Sullivan says the number of drivers in car-sharing networks in North America grew 117% between 2007 and 2009. Venture capitalists have taken notice and backed companies such as Spride Share, which launched its service as a pilot project only last fall.

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Zipcar, founded in 2000, also has attracted private investments, including $21 million raised last year from Meritech Capital Partners and Pinnacle Ventures. Last year, the car-sharing company also filed for an initial public offering to raise up to $75 million.

Adding the new Prius seems like a smart move by Zipcar, given that its members who forgo car ownership are also likely to embrace cars with lower greenhouse-gas emissions. Low-carbon cars may become a big business one day, and the federal government already has spent billions of dollars to nurture a market for electric cars. And in his State of the Union address earlier this week, President Obama called for 1 million electric cars on the road by 2015.