Car2Go plans to suspend operations in the Twin Cities, citing high state taxes on rental vehicles. File photo

Car2Go plans to suspend operations in the Twin Cities, citing high state taxes on rental vehicles. File photo

Car2Go plans to suspend service in Twin Cities market

Updated: November 30, 2016 - 10:35 am

Car-sharing service blames Minnesota’s high taxes on car rentals

The Twin Cities’ approximately 29,000 Car2Go members learned Friday afternoon the car-sharing service will suspend local operations on Dec. 31.

Minnesota’s “extremely high state car rental taxation rates” were a factor in the decision, according to a written statement shared by Car2Go spokesperson Blaire Kniffin. Minneapolis–St. Paul was one of nine U.S. markets where Car2Go offered its park-anywhere, pay-by-the-minute service, but taxes made it “one of the most expensive places in North America to operate our service,” Kniffin said.

She said there are about 400 Car2Go vehicles on Twin Cities streets.

“While the City is disappointed to learn of Car2Go’s news, we will continue to encourage mobility choices and options that can help address transportation challenges and economic growth,” said Jon Wertjes, director of Traffic and Parking Services in the city’s Public Works Department.

The company’s decision was a blow to Car2Go members like Chris Iverson, who was a student at the University of Minnesota when he signed up for the service shortly after it launched in Minneapolis in 2013. (It expanded to St. Paul in 2014.) Iverson now lives in the Lowry Hill neighborhood with his girlfriend, and he said the convenience of Car2Go allowed them to be a one-car household.

“It was a very large factor (in the decision) to get rid of my car,” he said.

Iverson said he took Car2Go just a few times a month in the summer — when he was more likely to make trips by bicycle — but ramped up his use every winter. He said it was more flexible and better for short trips than other car-sharing services like Hourcar, whose users must pay for at least half an hour’s use and have to return the vehicles to dedicated parking spaces.

“It was a really worthwhile service, and it’s very disheartening to see them leave,” Iverson said.

Andrew Degerstrom, who lives in East Isles, said Car2Go worked particularly well in dense, urban neighborhoods like his, on the edge of Uptown, where he would rarely have to walk more than a block-and-a-half to find an available vehicle. Car2Go users can leave the vehicles for free anywhere they can find legal street parking; the company covers meter fees in a deal with the city.

Degerstrom is also a member of Zipcar, which he said was a better option when he needed a vehicle for at least an hour or two and was planning to make a round trip. He said Car2Go was especially well suited to social outings — like visiting friends across town — and generally a cheaper option than calling Uber or Lyft.

“Getting my own car is not an option, just because I’m a full-time grad student now and I just don’t have money to get a car,” he said. “I actually enjoy being carless.”

The company previously had reduced its service areas in both Minneapolis and St. Paul. The service-area reduction in Minneapolis came after the City Council voted to license and regulate car-sharing services, which up until then were being tested in a two-year pilot program.

The issue of car-sharing services being taxed like traditional rental car companies also came up earlier this year, and Rep. Frank Hornstein said there were initial discussions with City Council members about introducing legislation at the Capitol. Those conversations apparently fizzled out.

“I don’t know why that that is the law,” Hornstein said. “And my view of this is that a car-sharing operation is very different from Hertz or Avis or any of these other options. … It’s not the same. It’s a different kind of consumer. It serves a different kind of service, and for that reason I think you have to explore taxing in a different kind of way.”

Kniffin said the company could return to the Twin Cities market in the future.

“It is our hope that we might one day resume operations here as taxation policy evolves and more people around the world adopt car-sharing to embrace all its economic and environmental benefits,” she said. “We would like to express our heartfelt thanks to every Twin Cities Car2Go member for supporting us, and regret any inconvenience this decision may cause them.”

Based in Austin, Texas, Car2Go is a wholly owned subsidiary of Daimler North America Corporation.

CORRECTION: This original version of this story incorrectly stated the minimum reservation time for Hourcar was one hour. It is 30 minutes.