HiGear, the peer-to-peer luxury and exotic car sharing service based in San Francisco, announced it is shutting down as a result of recent thefts involving their cars. A full explanation will be sent to HiGear members tomorrow, according to CEO Ali Moiz.

HiGear's main selling point as a car-sharing service was its focus on "high-end" brands like BMW, Audi, Aston Martin, Lamborghini, Ferrari and Mercedes. It offered comprehensive liability and collision insurance and carried out a summary screening of all its members, such as driving record and credit checks.

The company asked its members provide a security deposit ranging from $125 to $600 depending on the vehicle, in addition to a rental insurance charge of $20 to $40 per day. This was intended to help cover against any potential damage and loss and encourage members to treat the cars with care.

HiGear enjoyed a great start after is beta launch in August, clocking up over 25k hours of car shares. About 2,000 were in Los Angeles alone, where it had recently launched, suggesting good potential for the start-up, which expected to see 40-50k hours over the coming 90 days. After expanding to L.A., the company was hoping to offer its services in Portland and San Diego by the end of the year.

Unfortunately, HiGear was targeted by a criminal ring that ended up stealing 4 cars worth about $300,000 in total. Using stolen identities to bypass HiGear's security checks, the thiefs also used stolen credit cards to pay the security deposits, insurance and rental costs.

While police are said to have recovered some of the vehicles and insurance is now handling the remaining claims, this has led HiGear management to reconsider their entire business model. Concerns that this type of criminal activity is simply too difficult to avoid for a business like HiGear could not be addressed propertly and the CEO decided to close down the service about one month after the thefts took place.

According to TechCrunch, here is the email that will be sent out to members tomorrow to explain the situation:

Dear Member,

I am writing to you today with some sad news. After a great run the past few months, we have decided to shut HiGear down and discontinue the service. I understand this may come as a surprise since the service seemed to be doing so well. HiGear, in the short space of 6 months since launch, got over 5000 members and 300 luxury cars listed. We processed hundreds of rentals each month and got covered by Techcrunch, the Wall Street Journal and other mainstream press. However an incident last month showed us the inherent risk with the peer-to-peer nature of our service.

Last month 4 cars were stolen on HiGear by a criminal ring. The total value of these cars was around $300,000. While our insurance is processing the claims for reimbursement, and the police have since recovered some of these cars, this incident involved sophisticated criminals using identity theft, stolen credit cards and stolen IDs to bypass all the background checks that we had put in place. This incident exposed us to the worst-case risks inherent in our service. Even by improving security and processes, we are not completely sure we can prevent an incident of this sort from happening again given the peer-to-peer nature of our service. It is difficult to eliminate identity fraud completely on the internet. Companies like Amazon, Google and Ebay lose millions each year because of it. However when you compound that with the sum of large losses (the average HiGear car is worth $70,000), it creates an untenable situation.

New reservations were suspended on HiGear immediately after this incident. We spent a few weeks trying to see if situations like these could be prevented in the future affordably. Unfortunately, the result of our investigations has been that in order to best protect car owners and their cars, HiGear needs to be shut down to prevent organized crime from taking advantage of the service again.

We do not believe other peer-to-peer services that focus on economy, everyday cars are at the same level of risk of theft. Criminals get a better return for their efforts with more expensive vehicles. At this time we believe that Getaround, RelayRides and other similar P2P services offer adequate safety procedures and protection. We encourage you to try the other services if you would like to continue renting out your car.

In the meantime, feel free to browse through the HiGear cars and girls while the service is still available. Save your favorite as your desktop wallpaper. We’ll miss HiGear as much as you. It was a pleasure to provide this service for our members, and to bring happiness to thousands of people by getting them into the car of their dreams.

Feel free to write to myself or Murti personally with any questions or comments.

Sincerely,

Ali & Murti

What do you think? Could HiGear have survived by implementing tougher security checks or changing its financing model? Please leave your thoughts below.