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California carsharing bill signed into law; will other states follow?

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The new law, to go into effect January 1st, establishes that personal vehicle sharing does not constitute a commercial use of the automobile, eliminating insurance constraints on carsharing.

Carsharing -- in which car owners make their vehicles available to a managed pool of potential drivers when idle -- is an idea that has gained a lot of followers, not to mention an emerging industry of broker providers.  However, the whole concept has been hung up on insurance issues -- non-owner drivers would not be covered by existing insurance policies. 

Now, in California at least, that hurdle has just been cleared. On Wednesday, Governor Arnold Schwarzenegger signed Assembly Bill 1871 into law, enabling Californians to share cars in carsharing pools without jeopardizing their insurance policies.

The first-in-the-nation law, to go into effect January 1st, establishes that personal vehicle sharing does not constitute a "commercial use" of the automobile, eliminating the  primary barrier to broad adoption of personal car sharing opportunities.  Prior to the law, car owners ran the risk of losing personal auto insurance if they received compensation for sharing their cars.

Neal Gorenflo of Shareable: Work & Enterprise reports that the new law "could accelerate the growth of an already fast-growing carsharing industry." Existing carsharing services "could expand their fleets by allowing car owners to share their cars through their services," he writes.

If the idea spreads eastward to the rest of the nation, this may spur a whole new business model everyone can participate in. "Because your car spends on average more than 90 percent of the time parked and idle," asks Matthew Roth of the SF Streets Blog, "why not make money instead of sitting by as your investment depreciates in a garage?"

Frost & Sullivan estimates that car-sharing grew by 117% between 2007 in 2009 in North America, and will have more than four million drivers within the next five years. Well-known car-sharing networks include Spride, which employs social networking to help link up drivers with available vehicles, and ZipCar and City CarShare, which maintain actual fleets of vehicles for general sharing.

In the wake of the bill's enactment, Spride and CarShare announced they are collaborating to launch the state's first personal vehicle share program. The new Spride Share pilot program enables car owners to loan their vehicles to the more than 13,000 screened and qualified members of City CarShare. Drivers can visit the City CarShare Website or use a mobile phone application to reserve an automobile, which is then accessed with an electronic key fob.

Spride’s vehicles are equipped with City CarShare’s access and tracking technology to prevent theft or abuse.  With hours and mileage included, the average rate is $6.75 per hour for Spride Share or City CarShare members.

(Photo credit: US National Institutes of Health, Noisy Planet site)

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure