Xtracycle started building utility bikes for the masses 15 years ago.  Today we lead the field in making affordable, easy-to-ride, and capable cargo bikes and accessories.  Xtracycle believes in bicycles, and their ability to transform individuals, communities and civilization.  You are getting this newsletter because you wanted to hear from us.  We hope that the info that follows is useful, insightful, or at least good for a laugh or two.

Why is Zipcar bagging on the bike?

Maybe you too have seen this ad at your local public transit station? And perhaps you too paused, then cringed, when you realized you were looking at essentially an anti-public service announcement against bicycle commuting underwritten by…Zipcar?

No doubt, this ad represents a low blow to bikes and bikers everywhere, praying on broadly held fears that biking is uncool, unprofessional and unable to meet my needs (i.e. carry stuff).

Offensive Zipcar ad

Looking at this ad invokes a middle-schoolian anguish generally reserved for the sale of diet products and hair-replacement tonics.  Pictured are two apparent professionals overloaded with small objects – handbags, lunch, etc.  The woman gabs on, seemingly unaware of her own un-coolness.  The look on her colleague’s face no doubt reads “I would look so much cooler in a car.”

My immediate reaction to this ad was equally middle-schoolian.  Let’s shame the suckers, I thought. Maybe start a petition, create counter-ads and spin them through the Facebook web, but then, to what end?  And why?  As Zipcar is cynical about bikes, am I not equally cynical about cars?  Let’s skip the proverbial middle school slap-fest, dig deeper and ask ourselves, why is Zipcar bagging on the bike?

1.  Bikes for transportation are making a comeback.

This fact poses a threat to the Zipcar business model. The graph below shows recent bike commuting growth stats in some of Zipcar’s biggest cities.

Graph depicting rise in commuter cycling.Bike riders like us see the evidence supporting this graph every day.  More smart people are taking to the roads, and finding the equipment necessary to make traveling by bike easier, more stylish and more efficient.

On a morning ride with my kids to the park last Sunday, I met two new Xtracycle riders en route, saw one dad riding his son in a front loading Hank vs. Frank Bullitt, saw countless kids in trailers, and gobs of good old fashioned bikes with baskets or racks. What I didn’t see was very many racing or fitness cyclists.

Ask any bike shop what’s changed in their business in the last 10 years, and it’s this:  they are selling more city bikes, more hybrid bikes, more cargo bikes, more Xtracycles, and more racks, bags, panniers and baskets.

Recent statistics from Bicycle Retailers annual report corroborate this:

• hybrid bikes grew 13% nationwide in 2010, second only to road bikes
• “recreational riders slowed down their bike purchases” in 2010
• “26-inch mountain bike shipments to dealers dropped 8 percent” in 2010
• “2010 was one of the biggest years for kids bike imports”

In a nutshell, the US bike market is emerging from a nearly decade long slump, and much of what’s driving that growth is useful bikes that work well for transportation.

2.  Zipcar is expensive.

Wald Basket

For the riders pictured in this ad to simply get a Zipcar account, before ever driving a single mile, they will need to spend $85 (a $60 Annual fee paid up-front, and a $25 registration fee).  For the same cost, they could both get a front basket from Wald which would accommodate their fairly meager loads with no additional per mile cost, daily cost, etc.  At Zipcar prices, these folks could pay themselves $77 a day NOT to use Zipcar to get around.

Which is to say, after only 4 full days of rentals with Zipcar, these riders would rack up a bill that would allow them to buy and have installed an Xtracycle FreeRadical Eco kit, which would easily swallow their loads, carry the occasional passenger, and cost virtually nothing to maintain, repair, or park.   You can get a FreeRadical Eco for only $299, and a Radish Eco for only $999.  Both require assembly in a shop ($50-$150).

Xtracycle FreeRadical Eco

3.  Zipcar stock value is plummeting

Zipcar’s stock value over the last 10 years looks like the one of the best places to find your self on a bike, going downhill.

Zipcar market cap plunges

In the world of business, this graph points to a rough future for Zipcar.  Zipcar and the car-share business model may in fact be another “bubble” showing signs of strain.

Zipcar’s valuation relative to their assets places the value of each of their rental cars at about $150,000, as pointed out by Robert Platt Bell in his “Living Stingy” blog.  Bell says:

The company has been losing money its entire life and really started losing a lot last year [2010].  And the growth model is very limited, as I, and other analysts have pointed out.

Why is the growth model limited, as suggested by Bell?  Growth can be limited for many reasons not the least of which is viable competition.  Zipcar has competitors in the rental space, like the non-profit City Car Share, and the large rental companies that have not historically rented by the hour.  Potentially more disruptive than any of these competitors is that of municipal bike sharing programs that are taking hold in cities around the world.

4.  Car sharing is lagging, bike sharing is exploding

Chad Emerson, professor of Law at Faulkner University of Law, points out:

The true proving ground was car-crazy Paris, whose ad-supported Velib [bike sharing] system, inaugurated in 2007, has proven massively popular. After overcoming initial problems with theft and vandalism, the Velib program has been embraced by Parisians; its 45,000 bikes have generated rentals in the millions.

Equally successful systems operate in Barcelona and Montreal, which has the largest in North America. Montreal’s Bixi system, run by the municipal parking authority, has contracted to install bike-share programs in Boston and London. Bike-sharing programs have also spread to Latin America, with one of the largest in Mexico City, and Asia.

In the United States, only Washington, D.C., and Minneapolis have installed bike-sharing programs of a size comparable to DecoBike’s, though they cover larger geographical areas. Washington’s 110-station Capital Bikeshare system, for instance, extends into a portion of suburban Arlington, Va.

The fact is, folks, bikes are working. Car companies like Zipcar are seeing bikes as viable competition.  Product companies like Xtracycle and many others have already solved the problem posed by this ad, and the solution is not just convenient, cool and comfortable, but it’s good for your health, your community, and the environment.

A tool for simple living: Xtracycle

Zipcar’s business model is not proving successful, primarily because the areas where they concentrate their service (dense urban areas) are better served by bikes for short trips, than cars.  The cost of a rental car, plus associated parking fees, tolls, could be well over $100/day, likely higher than the cost of owning one’s own car.  In an economy like ours, this kind of discretionary income is drying up.  Meanwhile the desire for better quality of life is all around us.

Zipcar needs a better future, and bikes pose the solution. No major bike sharing program exists in any of the above mentioned cities (save for NYC), though they are coming on-line daily. Zipcar is incredibly well poised to sell off their automobile assets and invest in bike sharing technology, leveraging the thousands of parking spaces they own/rent to park their cars. Each of those spaces could fit a dozen bikes, raking in at least as much money for a fraction of the up-front and long-term costs.

So, after some consideration, I feel less angry at Zipcar, and more sympathetic. This ad is a dying gasp of a business built on a less-than-adequate solution. Meanwhile, the whispers of a transportation revolution to come (already here in places like Portland, OR) are increasing in volume.

Zipcar, your future lies in exactly what you attempt to discredit in this ad – affordable, capable and fun to ride bikes for the masses, available by the hour to anyone and everyone.

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