Turo rents out cars but insists it’s not a rental company

Over the past decade, Haddad and the company he oversees have uniquely disrupted the car rental marketplace. Once called RelayRides, the San Francisco-based startup defines itself as a peer-to-peer company, offering car owners a platform to share their cars with drivers who need a rental. 

Coming out of the pandemic, when some rental car companies sold off their fleet to stay financially afloat, Turo’s popularity accelerated as a low-cost option for travelers. 

Haddad called it the “rental car crunch” and noted that Turo’s popularity was apparent especially in places like Hawaii, where there was a shortage of rentals. He explained that prices on Turo remain competitive compared with traditional car rental companies because the platform offers an untouched marketplace.

“We allow our hosts to price their cars as they want,” he said. “It’s an open marketplace where prices will find their equilibrium. We don’t force a price point but provide our hosts with recommendations.”

In response to Turo’s gradual rise, the traditional car rental industry is actively working to rein in the tech company by calling for regulations like the ones that already apply to rental car companies. Turo, however, remains defiant and insists it’s not a car rental company. 

“Ultimately, there’s a car and you’re going places, but it kind of stops there,” Haddad says. 

“We don’t have the same price structure as a rental car. They have to maintain a fleet, a retail network with agencies and parking lots. We don’t have that model with peer-to-peer car sharing. Because of that, our fixed costs are pretty low. It’s essentially just the software.”

Turo CEO Andre Haddad pictured in his Lucid Air electric vehicle, near Fort Point in San Francisco, on Friday, March 18. (Photo by Charles Russo/SFGATE)
Turo CEO Andre Haddad pictured in his Lucid Air electric vehicle, near Fort Point in San Francisco, on Friday, March 18. (Photo by Charles Russo/SFGATE)

The differentiation hasn’t convinced the American Car Rental Association (ACRA) and its spokesperson Greg Scott. 

“They are renting a motor vehicle to another person for compensation. If that’s not what Avis and Enterprise are doing, then I don’t know what it is,” he told SFGATE. 

Scott added that while ACRA welcomes innovation to the industry, it challenges the limits of how innovators are perceived and regulated. 

“I’ve heard it from other peer-to-peer companies and it seems to be the backstop: ‘We’re new, therefore we’re different, therefore we should be treated differently,’” Scott said. “It didn’t fly very long for Airbnb and Uber. Yes, they are different, but the fundamental concept of giving someone a ride is the same even if you do it in [an Uber]. Eventually the state catches up with regulations.”

One particular battleground over regulations has been at the San Francisco Airport. Turo’s users vary, from car enthusiasts seeking to check off a dream mobile to test drivers wanting an informed experience before making a purchase, but about a third of Turo’s users are connected to airports.

One of the company’s tag lines tells consumers to “skip the rental car counter and book anything” with Turo. 

The company has an extensive history in its efforts to work out of SFO. In November 2016, then-City Attorney Dennis Herrera mailed a letter to Turo about its business with the airport.

According to the letter, the company attempted to invoke Section 230 of the United States Communications Decency Act to absolve it from any responsibility of the “conduct” of its car owners and renters, a claim that Herrera called “misplaced.” 

Turo continued to clash with the airport. According to a complaint filed by Herrera’s office in 2018, the company operated at SFO from 2013 to August 2017 under an off-airport rental car company permit that required Turo to pick up its customers at a remote rental car center.

In August 2017, Turo canceled its off-airport rental car permit and announced that it would stop operating at the airport. However, as the complaint states, the company continued to advertise and promote SFO car rentals on its website. “Turo’s deliberate flouting of SFO’s permit and fee requirements … constitute unlawful and unfair business practices,” the complaint said. The company was asked to pay an AirTrain fee and a gross receipts charge on its SFO revenues.

“They’re not paying 10% of its gross receipts at SFO which supports the entire airport infrastructure,” Scott said. 

Haddad said that Turo is still in litigation with SFO and its car owners are offering cars at the airport by arranging off-site pickups. 

He said that SFO is “one of the few airports we haven’t yet been able to find an arrangement for permitting.” Turo has bypassed the need to obtain a rental car permit at other airports across the country. It has reached agreements to work out of Tampa and Orlando airports and entered a pilot program at Denver International. Haddad said Turo should operate under a peer-to-peer car-sharing permit, instead of a traditional rental car permit.

“We strongly believe that we don’t fit in that category,” Haddad said. “The rental car permit is designed for companies with hundreds or thousands of cars garaged at the airport. They’re paying for all the costs to use maintenance stations and have a car cleaning infrastructure. It’s a big chunk of real estate. We don’t benefit from this infrastructure. Our hosts meet their guest at the curb, hand over the keys, say hi and then off they go. We have argued that the model is different and that we need a peer-to-peer permit.”

In the face of its setbacks at SFO and other airports, including Boston Logan International Airport, Turo’s business model is proving successful, confirming its status as a “unicorn” company.

According to its recent form S-1 filing, used by companies planning on going public to register their securities with the U.S. Securities and Exchange Commission, the company grew substantially during the pandemic. 

The filing shows that in the year 2021 through September, Turo more than doubled its yearly earnings for a net revenue of $330.5 million, boasting a usership of 1.3 million “guests” and 85,000 active “hosts.”

One of these active hosts is Haddad himself, who offers five of his own cars to rent on Turo. In March, he added the Lucid Air to the company’s vehicle repertoire for $699 a day. It’s a far cry from the first car he ever owned, a 1989 Opel Corsa.

Currently available on Turo’s platform is a 2017 Opel Corsa in Madrid, Spain. It’s offered through a Spanish car rental company called Carflet Rent a Car, furthering the complicated relationship between car rental and peer-to-peer car companies.