Neil Peterson, CEO, Flexcar, Seattle Can a car-sharing company change the way America drives?
By Julie Sloane

(FORTUNE Small Business) – For the CEO of a car company, Neil Peterson has some surprising ideas: He thinks more people should take public transportation. He wants to see fewer cars on the road. In fact, he'd be thrilled if you got rid of your car entirely. As the CEO of Flexcar, Peterson's in the car-sharing business--hourly rental that aims to give customers access to an auto when, and only when, they need one. Americans may never stop driving, but Flexcar hopes to change the way we think about cars.

Since its launch in January 2000, Seattle-based Flexcar has signed up 12,000 people in five states and the District of Columbia. Members reserve a car--parked at a designated street spot--over the phone and open the door with an electronic key card; when they return, trip data are sent wirelessly to Flexcar, which bills monthly for time and miles used. The price, $8 to $10 per hour, includes gas, insurance, and ten miles.

Peterson discovered car sharing in the early 1990s on a trip to Europe, where the concept has been popular for more than a decade. He had been making idea-scouting trips for years while at the helm of public transportation agencies in Seattle, Los Angeles, and the Bay Area. (He's the man behind dual gas-electric buses and "articulated buses," which are twice as long and bend in the middle.) Unbeknownst to Peterson, Seattle's public transportation agency had also been researching car sharing and was looking for a partner to run a pilot program. Seattle officials tried Hertz, Budget, Enterprise--no one was interested. Then Peterson heard about it. "They didn't know I had this in the back of my mind for years anyway," he says.

Ideally, Flexcar will serve as a complement to public transportation. "One of the objections transit agencies always get from commuters," says Peterson, "is 'What if I need a car during the day?'" Flexcar's answer: You rent one on an hourly basis.

To date, Flexcar has been growing slowly, expanding only where it can partner with transportation agencies, universities, and other organizations. Increasingly Flexcar's growth is coming from businesses that find it's cheaper to rent Flexcars than maintain a fleet of corporate cars. (Starbucks now has five Flexcars on its Seattle campus.) Businesses now account for 40% of revenues. Flexcar doesn't expect to be profitable until 2005, although its two oldest markets, Seattle and Portland, Ore., operate in the black. (Each market, Peterson estimates, takes about 18 to 24 months to mature to profitability.)

In the next five years Peterson wants to bring Flexcar to 30 markets, but the question remains whether enough people in enough cities will be interested. Robert Cervero, professor of city and regional planning at the University of California at Berkeley, thinks car sharing makes sense for those city dwellers who face daily parking hassles, but not for suburbanites making daily runs to Little League practice. "I don't think the market economics are going to work out in more than eight to ten cities," Cervero says. "We make it too easy and cheap to own a car."

Still, Peterson in his small way is making driving a greener activity. Of his cars, 25% are Honda Civic gas-electric hybrids. (In 2002, Honda bought an 18% stake in Flexcar.) And about half of Flexcar's members report that after joining, they either sold their car or held off on buying one. (Then again, 70% of Flexcar members listen to NPR, 30% have master's degrees, and 9% have Ph.D.s, so it's not exactly a random sampling of the population.)

Meanwhile, competition has sprung up, in the form of Boston-based Zipcar and a handful of nonprofits. But Peterson says that rivals only help spread the car-sharing gospel. "It's not a question of selling to people," he says. "It's getting the message out." For his movement to succeed, that message will have to gain traction--by the hour.