Turo: Airbnb of Auto
Turo, the Airbnb of autos, is well-positioned to scale more quickly than competitors to offer the best car rental experiences in the country.
Turo: Airbnb of Auto
Want to drive Erlich Bachman’s Aviato-themed Ford Escape from the show ‘Silicon Valley?’ You can rent it in LA for $49 / day. How about a Tesla Model S? You can order it on-demand for $199 for a Saturday. Turo, the leader in on-demand car sharing, offers these aspirational driving experiences in addition to your everyday needs for renting a car, both for business and professional purposes. As Airbnb has created a platform for individuals seeking housing with those looking to make additional income from their homes, Turo has developed a platform for drivers to rent cars for their everyday needs and special driving experiences, often at a lower price than traditional rental car services, while also allowing car owners to make additional income from their cars. It is estimated that an American car isn’t being utilized for about 92% of the time, thus Turo is not only going after an existing car rental market but also seeking to expand the market by creating additional opportunities to rent cars for both necessity and experience.
Platform Value Creation
Turo is an app platform linking car renters to car owners. It is currently available in more than 3,500 cities. Besides having the convenience of grabbing a car in your local neighborhood, many cars on the platform provide for free delivery to your location or to the local airport, which can be a huge appeal to business travelers needing a car. No matter what your car rental purpose, it is estimated that Turo prices are 25-50% lower after taxes as compared to traditional car rental services. Value plus convenience help drive car rental demand to the platform. On the other side, Turo provides a quick and easy way to monetize a car for the owner. You are allowed to set whatever rental price you want, but Turo can also assist you to dynamically set the rental price based on car market value, location, and time of year. Turo also provides $1 million in insurance and 24/7 assistance to cover the car while it is being rented out on the platform. According to Turo employee Pushkar Modi, renting a Tesla Model S for a week out of the month will cover the cost of ownership. For those of us with less luxurious cars, renting on Turo can likely cover the cost of a lease: renting a $20,000 car a week per month (essentially weekends) will earn an estimated $3,500 for the driver per year.
Platform Value Capture
Turo does not charge users to access the platform, but charges 10-35% of the fee of the rental, depending on the level of insurance coverage the car owner possesses (having commercial insurance for your car will allow you the lowest fee of 10%). Turo also captures valuable data of car rental prices in various geographies across a wide variety of car types, which can be utilized to help car owners maximize value on the platform and therefore drive incremental revenue for Turo. By providing a straightforward fee to car owners and not requiring anything besides a few photos to set up a car listing, Turo was able to achieve scale quickly.
Competition
Turo’s largest competitor in app-based on-demand car rental is Getaround. Getaround does not match Turo in terms of delivery service and is available in only a handful of major cities. However, Getaround installs a piece of technology in each of its cars that allows the user open and lock the car through their app during the rental period. This offers great convenience as on Turo the renter must meet the owner in person to hand off the keys. Despite the additional convenience, this limits Getaround’s ability to scale quickly as the process to onboard cars on Getaround is much more time consuming, and it also adds more costs on the car owners on Getaround’s platform. Thus, Turo will be well positioned to scale more quickly than Getaround and take advantage of increased network effects of both more renters and car options on the platform. Multihoming will certainly be important and prevalent in this market, as renters will seek out the lowest prices for their cars, but Turo is in a good position to offer best prices by having the largest and therefore most competitive platform.
Great post Brandon! I see this as a low-end consumption play on the part of Turo – appealing to renters who care less about the type and model of car they will drive for the weekend due to Turo’s smaller inventory compared to an Enterprise or Avis. Do you think this will force car rental companies to move up-market and serve increasingly higher-end cars? How have they responded thus far?
Thank you! You are definitely right that Turo started off at the low end towards people who care less about car type and model, but what they have been surprised to see is that folks who own high-end cars have also been listing on Turo and people have sought out $150-$300 / day specialty rides driving high-end cars as well. This is tough for folks such as Enterprise or Avis to compete as it challenges their inventory to be able to cover all ends of the spectrum as easily as Turo does in my opinion. I believe the rental car companies will need to specialize on one end of the market or buy a service like Turo to offer more convenient locations. So far I haven’t seen much evidence that Enterprise or Avis have reacted, as Turo is still not a massive threat to their business. Rental cars are still quite popular from traditional rental agencies.
Great post, Brandon. I used Turo when it was previously RelayRides and remember comparing the options of using RelayRides vs. Getaround vs. Zipcar etc. It’s a great concept though it interestingly doesn’t seem like it’s taken off as quickly as its analogous AirBnB. Why do you think that is? Purely given it is homes vs. cars or an executional difference? One quick note I found interesting… I was told a while back that because Turo/RelayRides requires an in-person keys handoff, there tends to be less rental car damage because renters feel more accountable after meeting the owners (as compared to Getaround, which requires no human interaction when accessing the car keys). Curious if Turo/RelayRides intentionally designed this experience to be the case or if it was just a byproduct of their design.
Thanks for the comment! I think one of the big reasons Turo hasn’t risen as rapidly as Airbnb, despite being founded around the same time, is that the car rental market as a whole has been challenged simultaneously by the on-demand ride services, which have not only taken over the taxi market but also grown that market substantially. Thus, the demand for rental cars has definitely in my opinion been reduced as on-demand becomes more affordable. I don’t believe you see this in a similar fashion in the hotel / housing industry. Also, Airbnb has done an excellent job expanding internationally, while Turo has stuck much more to focusing on expanding in the U.S. In terms of the key handoff, it’s a great point. I think Turo took this approach mainly because it takes money and time to install a device in every car to unlock it with an app – with drivers and passengers just handing off keys, you can scale much more quickly by having a supply of cars sign up more quickly. While convenient, this is to Getaround’s detriment, plus the added factor you rightly raise that it adds in an additional level of accountability, similar to what we see with Airbnb and a renter meeting the owner.
I like the idea of CarBnb (oops, I mean, AirCar) but I’m sceptical. I’ve used Turo once and the hand-off process was incredibly time-consuming as you had to wait for the owner to show up. Moreover, the cost was really high compared to rental cars (I had a similar problem with Zipcar…where are they today, anyway?) It’s also funny how the conversation centers around car utilisation – true, cars are heavy assets with fixed costs, but the marginal cost of driving the car out isn’t zero. The more miles on your car, the less it’s worth. Are drivers sufficiently taking this into consideration when Turoing their cars?
Completely fair point that there is a cost to car utilization, and perhaps this is a reason Turo hasn’t taken off with a similar trajectory that Airbnb has enjoyed. Definitely fair to raise the risk that the key handoff experience and execution can be a problem, but hopefully having a platform that allows for both sides to rate each other will raise the quality over time so that there is a dependable inventory of cars. This issue is reduced with scale in my opinion.
I really enjoyed this post. I’m curious what Turo will look like in the future of self driving cars, and what they are doing to prepare. Once Uber offers self-driving rides at an extremely low cost, and car owners can rent out their own self-driving cars on the Turo platform, this will essentially put the two companies in direct competition. I would be interested to know what niche they believe they can continue to occur when this huge shift occurs.
Great point about the future of self-driving cars. My best guess is that Turo would then focus on the high end of the spectrum, catering to car enthusiasts who want to pay to enjoy the experience of driving great cars without having to own one and maintain one. I think it would be very tough for Turo to pivot to be a challenger in the self-driving car logistics sector, which is where I see Uber and Google and the like all headed. That said, I think self-driving cars are still a very long way off from being a mainstream mode of transportation (10 years minimum), so in that time Turo still has a great opportunity, despite the fact that the largest market eventually will disappear most likely.