Customers say Getaround has been slow to pay repair bills
bloomberg.com
bloomberg.com
That seems like a risky move, and an attempt to compete in the general car rental business without the protections of a well established business (compared to a startup).
While it may make sense for a car owner to assume some risk to recoup costs on a vehicle they already own, buying one for the sole purpose of renting it out seems less sensible.
They bought a productive asset with credit and found it was less productive than it cost. This is simply capital expenditure. Not a carry trade.
Say you live in a major city and need a car, but it would sit there parked 80% of the time. You can't justify the cost.
But if you could rent it out that 80% of the time, you end up in a situation where you have a car to use, but it's either costing you nothing or making you a little bit of money.
> She purchased a Prius last year specifically to rent on Getaround, using the money to cover both its monthly costs and those of her primary vehicle.
She bought an investment vehicle (no pun intended) that worked for a while and then crashed (still no pun intended). She overextended herself and can't handle the downside.. this feels like a bit game of musical chairs and she was caught without a seat. :|
Oversized rents like this don’t really work out if supply is able to meet demand properly.
Of course, practice looks different, and many start-ups/gig-economy/P2P lending/... prey exactly on people who don't recognize the difference between theory and practice.
Uber looks like a great thing if you only count gas money not depreciation of your car.
That camera lending startup that made the front page a couple times ago looks like a great idea until you realize that despite their assurances which sound like you're covered, you're SOL if someone just steals your camera.
But in bad times, income dries up—in this case, extremely quickly—and the flaws of that business model are exposed.
Airbnb, coworking spaces, Getaround, and home services companies are just a few examples of this model. Bird/Lime also have this issue and will likely collapse as well—both have laid off most or all of their staff (Bird in particular handled it poorly.)
It would certainly be ideal if Restaurants, Cruise Lines, Hotels, Airlines had the balance sheets to handle an event like this, so far a 2 month slowdown, especially as there are things like cancelled events, hurricane season, recessions reducing travel, etc.
(No comment on whether these things have a questionable business model, this is just how implication works.)
Companies can negotiate loan payment holiday if they can persuade their creditors that it makes more sense to get an extra few months of debt relief than to be closed down - which would probably take a few months anyway.
Not so with fixed staffing costs. Even if furlough is an option you need to decide who's essential, and who can be layed off temporarily - not always simple, especially if you're not sure if the downturn will be short.
If furlough isn't an option you suddenly start burning your cash reserves after a huge drop in income, and investors start getting very nervous.
By the time bond holders are taking a haircut, shareholders are wiped out.
> Not so with fixed staffing costs.
Layoffs aren't easy, but owners have more flexibility and control than they do negotiating with bond holders.
Bird/lime own their inventory.
Airbnb is better off than the hotel chains IMO. The hotel chains have to keep paying their staff and rent while revenue drops, but airbnb just sees the revenue drop.
It exposes the people who bought properties to list on airbnb on aggressive margins or like the example in the article of someone buying a car just to put on the platform. I wonder how much rental prices will be affected when the properties that were bought to use for airbnb are brought back to the long-term rental market.
But Bird/Lime are in deep trouble, and not just because of cost of the scooters they own. Who is going to rent one, not knowing the health status of the previous renter?
I'd be much more comfortable using a scooter because I can just wipe down the handles. I have no idea what's going on in someone else's house, and in my experience AirBnB hosts are pretty shitty about cleaning up their properties even though they make you pay for it.
Sure, you can wipe down the handles, if you brought wipes with you. That makes it a lot more spontaneous to use, though (unless you carry wipes everywhere, which is in fact a reasonable thing to do).
I understand your point about hosts bearing the brunt of the costs, but that's comparing AirBnB the business to AirBnB the users. I was comparing AirBnB the business to Bird/Lime the business, because that was a juxtaposition you made in your original comment.
Anyway, agree to disagree I guess.
The scooter companies might have less reserves though, and their market is probably oversaturated even in good times.
And it's very likely that AirBnB restrictions will increase post-COVID19 to eliminate a lot of the apartment units that were (illegally) converted to AirBnB units, and that enforcement of existing AirBnB restrictions in cities like NY and LA will increase dramatically, both for safety reasons and to protect the hotel companies that actually employ workers, pay hotel taxes, and contribute to the local economy.
Turns out there were a lot of unsustainable businesses like this. The Fed and government stimulus will not be able to reflate that bubble. No matter how many companies we nationalize.
What's hurting e.g. Airbnb is not that they are a marketing middleman between people offering a service and people in need of a service. It's that the need for that underlying service has greatly diminished--if people don't need the underlying service anymore then they don't need a marketing middleman for that service either.
What you need to make your point are examples where the underlying service still does fine in bad times, but the marketing middleman for that service do not.
Even though I wasn't concerned about my car being mishandled by renters, I couldn't believe the condition some renters would return it. After this experience, I would NEVER rent out a nice car through these services. If people treat your car like shit, imagine what they do to big rental car company's vehicles.
"We're like X but without all the stodgy process and procedure!"
[a few years pass]
"Turns out all that extra stuff was there for a reason and now we're going to either punt on it and screw over our customers and/or contractors, or monkey-patch it onto our business that wasn't built with it in mind."
I'm sorry, I couldn't resist.
The downside risks versus the short-term gains are too asymmetric.
Car rental - damage is very expensive, margins are tiny House rental - long term loans, short term lets that have proved very volatile in the pandemic. Office space rental - wework, again long term borrowing, short term rental.
The idea that we can endlessly slice and dice risk to get a "free" gain is rotting society.
Learn a skill. Create value. If everyone does this we live in a better society. We cannot all live off each other. Someone has to create value.
At least if Getaround disappears, I'll be able to delete my Facebook account. For a long time they were only allowing Facebook or Google based logins.
But for the founders and investors that offload shares. I agree with you, you can't value a gazillion times down the chain.
There should be a list of what businesses will remain strong and become stronger so entrepreneurs can quickly create new businesses ..anything food related, medical, online sales & delivery, anything internet/communication infrastructure related, govt services, COVID prevention, COVID research... are some I can think of
That may even carry forward somewhat. You have someone who doesn't have a washing machine, well the laundromat is closed or they don't want to go there and they just got $1200, plus there are lower interest rates and cheaper financing, so now there's a truck delivering a washing machine and they're never going to go to the laundromat again. Even if it eventually breaks they'll buy another one because by then it's the status quo.
It may be a good time to get into the business of making stuff.
A great business for the GetArounds of the world is to focus on using their capital to create things that are in demand now and will continue to be in demand until a proven vaccine is found. That could take weeks, months, years and those with the capital now who shifted to meet demand will survive. Those who wait for a vaccine and who didnt change gears will be mostly gone. They waited thinking this will soon pass and yes the curve might be flattened soon, but the fear and how it changes society (until we have a proven vaccine) will remain!
Many buildings, houses, simply cannot accommodate a laundry machine, many prohibit installation.
Many will go to the laundromat because of convenience.
For what it's worth, in every emergency shutdown order I've seen, laundromats have been classified as "essential businesses."