Repeated theft shuts down luxury car sharing startup

Peer-to-Peer luxury car sharing startup HiGear closed this week due to several thefts of members' cars.

It seems that being handed the keys to a virtual smorgasbord of luxury and classic cars was too tempting not to fall victim to a ring of professional car thieves. Using stolen identities and credit cards to bypass HiGear's member security checks, bandits boosted four member vehicles worth a total of $400,000, according to TechCrunch.com. The worst part is that members probably personally dropped the keys into the boosters' open hands.

Unlike other car-sharing networks, HiGear didn't use an iPhone-based door unlocking system or immobilizers. Renters made an old-fashioned reservation for the vehicle and scheduled a time with the vehicle's owner for a physical key exchange.

Car owners were advised to meet renters in a public place and to check driver's licenses to make sure they were the same person on the reservation. However, even that protocol coupled with HiGear's renter background and driver's license checks wasn't enough to weed out fraud or foil sophisticated car thieves who use stolen identities.

Although some of the vehicles have been recovered by the police, the HiGear CEO realizes that future heists are inevitable, and therefore has decided to close the business. And it's a shame, because business was booming and growth was strong.

Last year HiGear raised $1.3 million and expanded beyond the Bay Area to Los Angeles, and counts more than 5,000 members and 300 listed cars. The average price of a HiGear vehicle for rent is $70,000, and ranges from a Bentley Continental or Lamborghini Gallardo to a 1969 Ford Mustang.

Closing despite apparent market success could add fuel to the fire for peer-to-peer sharing skeptics. Last year AirBnB suffered a lot of negative publicity during a critical fundraising period when a member's apartment was trashed and stripped of valuables. A Forbes writer pointed out that GetAround's car sharing business model was ripe for fraud because it was a veritable shopping list for thieves. GetAround members were particularly vulnerable to theft because keys are hidden in the car, and members are not required to use immobilizers. However, GetAround has indicated that it will add new security features that will allow members torestrict rentals only to Facebook friendsor trusted members, but hasn't given a timeline on the implementation.

In a letter to members notifying them of the service termination, HiGear's management stated that in their analysis, other non-luxury vehicle sharing networks, specifically GetAround and RelayRides, are not as vulnerable to theft because "everyday vehicles" do not offer enough return on investment to sophisticated car theft rings.