What should you do with a car that you only use once a week? You could let it sit there losing its value or, hope the founders of RideEco, you will use their collaborative consumption model.
RideEco was founded last year by Ian Yong, Samantha Quah and Edwin Koh. It charges car owners to be part of a scheme where other people can borrow their car for short periods of time, in return for a fee set by the owner.
Yong tells StartupSmart how he hopes the collaborative consumption trend will catch on and propel RideEco into profitability.
What gave you the idea for this?
About 11 months ago I realised that I was surrounded by cars in the city that were parked in the same spot for three days a week, without being used.
I knew people who needed cars, so it made sense to put the two together. The idea has been a success in the US but it hasn’t been done in Australia. We thought we’d explore the idea here.
Within two-and-a-half months we’d registered 30 car owners and 150 borrowers. It’s a bit different from the US model because the insurance policies are more regulated here – so we have to check there’s a validated driving licence, no p-platers and so on.
Where’s the gap in the market? After all, there are various short-term car hire schemes, as well as the big rental companies.
This is very much aimed at the owners of underutilised cars. You have around a $7,000 a year depreciation on a car and that is a waste of money unless you are making some sort of return on it.
For the borrowers, yes there’s Flexicar and so on, but the rates are a bit pricey. We have no booking fees and people pay based on the number of hours they use the car.
We provide a recommended price, based on the value of the car, say a car worth $16,000 is $5-8 an hour.
But it’s up to the car owner to set the price. You could have a longer-term deal where someone who flies in from Queensland to Melbourne throughout the year, for example, will pay $2.50 an hour, Monday to Friday. We do have one requirement in that cars need to be available for five hours a day five days a week, at a minimum.
People can get a message from someone who wants to borrow the car and they are then able to have a mobile pick-up, so that the owner doesn’t have to meet somewhere for a key swap.
The borrower can unlock the car with their smartphone, with technology we have utilised with the cars.
Owners have membership plans that are, for example $612 a year for a car worth between $10,000 and $30,000. They can easily see a return on that.
How long has it taken you to develop the business?
We spent around nine months on insurance work, the legals and developing the site and app. We also had to get the Telematix unit that sits within the vehicles and detects the motions, such as accidents.
It took a lot of groundwork. The hardest part has been setting the right price point. You want to make it worth the owner’s time, so that the cost of putting it on the platform isn’t more than the insurance of the car.
Compared to an insurance plan of $1,100 a year, this will cost owners $612 a year, with 24/7 roadside assistance. If you have a fleet of cars, you can put them all on the platform and increase those savings.
We’ve had designers and developers in to make the mobile site and app. We want to make it as mobile as possible, so people can assess it wherever they are.
When do you hope to be making a profit on this?
We hope to be profitable within three years. We plan to have 700 vehicles and 1,500 borrowers in Sydney and Melbourne by then.
What is your plan for growth?
We have a PR campaign as well as advertising online and other mediums, such as ads on petrol pumps. We want to cover off all the angles.
We hope to have six members of staff within the next six months to work on operations and customer service.
We offer a 24-hour line to call if there are any difficulties or disputes between owners and borrowers, which the three of us look after at the moment. We hope to have the app live by mid-December, too.
People are used to paying a rental price and other car sharing businesses own their own fleet of cars, so I think people will be nicely surprised by what we can do. We can do it cheaper and to a broader market.
What was the thinking behind your brand? Are you aiming at promoting the cost benefits or the environmental benefits?
The business has both aspects, but the main focus is on collaborative consumption. The model is about sustainability and reducing CO2.
There are people who are just cost-conscious and not environmentally friendly, but when you speak to them on the phone, there are only a few who really don’t embrace the idea of sustainability. We are targeting people who are university-educated and know what collaborative consumption is.