Vroom vroom

Car drivers’ behaviours are changing, discovers Jason Hesse. Goodbye ownership, hello rental.

The transition from an ownership model to a service model is taking the car market by storm. How is WhipCar making itself stand out from the plethora of car clubs and car rental companies?

Market

WhipCar is a marketplace connecting car owners with spare capacity to people in their neighbourhood looking for a car to drive for a few hours. The service enables car owners to rent their cars out when they are not being used.

The average car in the UK is only driven for 4.6 hours per week. “This means that for 92 per cent of the time, your second-most valuable asset is going unused,” says Vinay Gupta, co-founder of WhipCar. “The model is changing, people now prefer access to a service rather than ownership.”

It’s a big market. While WhipCar does not have any direct competitors in the UK, it is up against other models, such as car clubs and straightforward rentals. According to Frost & Sullivan, the size of the car club market in Europe is projected to reach €4 billion by 2014-15. The size of the UK traditional care hire market is £3 billion.

How does the service work? Owners who visit the website can input details to be given a rental valuation for their vehicle, this is based on the age and model of the car, where the car is based, and other criteria. WhipCar does not accept vehicles older than eight years old or cars in the highest insurance groups.

Owners are then given details of how much they can earn per hour, day, week or month to rent out their car, and are able to tweak their prices. “It’s all about supply and demand. In one location, a Mini Cooper might make £32 a day, in another, £38. It depends on the area and on the drivers,” explains Gupta.

For drivers, after signing up to the service, a conference call is set up between the driver, the DVLA (Driver and Vehicle Licensing Agency) and WhipCar to ascertain their eligibility to drive and how many points they have on their license. Once drivers meet the criteria, they can request to book a car on WhipCar. Car owners can view the driver’s profile as well as any feedback from previous rentals. Drivers and car owners can exchange messages to ask questions about the car, what it will be used for, and more.

Once the owner accepts the booking, the driver’s car is debited by WhipCar and the two parties’ personal details are shared, such as the exact address of where to pick up the car. The owner is provided with the last four digits of the driver’s license number to check when they meet. Text message alerts are sent to both parties before and after hire with a reminder of the particulars. The car owner will show the vehicle to the driver and answer any questions, before the driver takes it for the rental period. When the driver returns the car, which must have the same amount of petrol as when it was hired, they will hand back the keys and both sides will feed back on each other on WhipCar.

Insurance for the vehicles is provided by WhipCar, which has created its own proprietary insurance product with Lloyds of London.

WhipCar’s challenge is user behaviour. The model is new, so WhipCar must educate and make its market aware of its existence and how it works. “When we first launched, people were using the service with an ownership model in mind. But today, car owners see the vehicles as another asset and WhipCar is just another way to offset the cost of this asset. Over time, we’re getting customers who have a different mindset.

“The potential is huge,” he adds. “As the behaviour becomes more pervasive, we expect to have more people signing up to the service.”

Team

WhipCar was founded by Vinay Gupta and Tom Wright.

Wright previously worked on BSkyB’s and HarperCollins’s web development teams. He also previously founded Gurgle.com, a social network or pregnant women, which was acquired by MotherCare.

After a career at AT&T and American Express, Gupta moved to London in 2004 to do an MBA at London Business School. After his MBA, he worked at companies such as Fleming Media, MySpace, Emap, Vue Entertainment and the Abu Dhabi Media Zone before co-founding WhipCar with Wright.

“We both found ourselves working for a fund, but the project fell through. We realised that we wanted to work together, and we came up with the idea for WhipCar. We both quit our jobs in June 2009 to work on the business,” says Gupta.

WhipCar has ten employees, all based in London. The team stayed very small until recently, Gupta explains: “We’ve always been a small team. As recently as last summer, there were just three of us at the company. The core team was probably too small for too long, but it helped to keep us very focused.”

Half of the employees are technical, and the rest are marketing and customer service. The development team is made up of one in-house designer, two front-end developers and two back-end developers.

Tech

The site is built on PHP and MySQL, and development work has been a combination of in-house and outside involvement.

WhipCar’s main technological challenge has been the platform’s risk analysis algorithm, which assesses risk profiles for drivers and vehicles to generate bespoke insurance certificates for bookings.

“Because of the nature of our service, we request a vast array of surprisingly-complex data,” explains Gupta. “It analyses people in different locations looking to book cars, how much a car is worth – which varies from one location to the next – and much more. Our CMS is growing ever-more complicated, and we’ve restructured it so that it is future proof.”

Owners can set up new profiles “virtually instantaneously”, but the process is more onerous for drivers, which must have a three-way conversation with the DVLA and WhipCar. There is no digital solution to this, and it’s obviously a key barrier to the business scaling. It’s down to outdated systems at the DVLA, rather than because of Whipcar, Gupta is keen to point out: “If there were a digital way of doing, of course we would do that. It’s not ideal, but all of our competitors, ZipCar, StreetCar and other car clubs, have to go through it. I’m sure the procedure will improve over time.”

Developers are currently working to release an iPhone app for WhipCar by June. “It’s a request that we’ve received a lot from our users,” says Gupta. This will enable users to find nearby cars available for hire, based on their geo-location.

Traction

There are more than 19,000 cars signed up to WhipCar, which Gupta says has been achieved without any marketing – users have found the service through word of mouth.

The most popular make is Ford and Volkswagen, followed by BMW and Mercedes. In north London, the most popular car is the Toyota Yaris, while in south-west London it is the Mini Cooper. The popularity of car makes and models differs enormously by region.

The median driver is 32 years old, and car owners tend to be affluent “professionals”, such as doctors and lawyers.

There is no fee for car owners to list their vehicles on the website. WhipCar’s business model is to take a 15 per cent commission (plus VAT) on car owners’ daily rates, plus a £3 transaction fee per booking to the driver. The company collects all payments from the driver as soon as a booking is confirmed and pays car owners a monthly cheque based on rental activity in the prior month.

To hire a car for a day, the median daily rental price is £30; this is significantly cheaper than a car club or traditional car rental. “If you’re looking to hire a car for a day or longer, we’ll often be the most economical choice for you,” says Gupta. “We don’t charge a membership fee or annual fee, so there is no barrier to entry.”

WhipCar has just one investor, Delta Partners, which led a seed round in October 2009 for £1 million. While the company is not currently fund raising, Gupta says that he’s always open to meetings with investors: “We’re on the radar screen of many people. It’s an interesting sector and are always looking for people who can add future value to the business.”

Future growth in users will be achieved when the company starts its marketing, says Gupta: “We’re only starting to market WhipCar now. Up until now, we’ve been working on the user experience. We want to ensure the platform was robust and we wanted to add new features. After two years, we’re happy with the product and we’re ready to scale.”

He adds that the site was designed with international deployment in mind, although the company will focus on building the UK user base first. “We’ve already had interest from investors and potential partners in 25 countries, and we can push the right button to expand abroad when the time is right. But because we’re trying to change user behaviours, we want to walk before we run. Our goal is to penetrate the UK first.”