Car-sharing: The future of urban mobility

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In recent years including 2013, auto industry analysts have noticed that the younger generation has lost interest in buying cars especially in matured markets like Europe, where efficient public transportation is available, economic growth is stagnant and rising unemployment makes people less willing to splurge on new cars. The young prefer to buy smartphones and go car-free not only to save money but also to live more environmentally friendly lifestyles. Because of urbanization, congestion and pollution, car-sharing services like Avis’ Zipcar on-street rental and Uber are becoming the trend in the urban centers of North America and Europe.

In fact, the big carmakers and car rental companies are forming new ventures to offer pay-per-use services.  As Tony Douglas, the head of marketing and sales at BMW’s mobility, was quoted as saying by the International New York Times, “Our core business in the ’70s was selling cars; in the ’80s, late ’70s came the great innovation of leasing and financing. Now you can pay per use of a car.  It’s like the music industry.  You used to have to buy an album, now you can pay per play. Particularly among young people, you’re going to see the rise of car-sharing in cities and the decline of owning my own car.”

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BMW has teamed up with the car rental company Sixt to form DriveNow, while Daimler AG has joined forces with the rental giant Europcar to create Car2Go.  Robert Henrich, the CEO of Daimler Mobility Services, which includes Car2Go, and others in the industry foresee the future of mobility as “multimodal” with urban dwellers using smartphones to plan mix-and-match trips that combine cars, bikes, public transportation and walking.  “Young customers cannot imagine a life without smartphones anymore, and we need to be part of the smartphone world,” Henrich told the New York Times.

“THAT’S SO HENRY FORD.” As Digital Solution columnist Katherine Boehret wrote last month in The Wall Street Journal: “Still own an automobile? That’s so Henry Ford… If you’re still driving your own car, you might need to get up to speed. Car sharing and ride sharing have cruised into many cities around the world… Renting a car no longer means going to an airport or rental office to get one.  You might be able to find a car a few steps from your front door… And smartphone apps are making it even easier to find available rental cars and rides… This is especially common in cities where services like Zipcar, Car2Go and Enterprise (with its Enterprise CarShare program) let users pick up or drop off cars on streets or in parking garages.”

Last year, about 2.3 million drivers worldwide belonged to a car-sharing service, a number expected to increase to 26 million by 2020, Frost & Sullivan consulting group mobility expert Martyn Briggs is quoted by the New York Times as saying.  He said that about two-thirds are likely to use station-based services like Zipcar while a third will use the new, one-way approach, in which cars have no set home location.

Boehret explains the car-sharing procedure this way: To start, you’ll need a membership with the company, which usually requires a fee (example: $25 application fee and $40 annual membership fee at Enterprise), and some information like your driver’s license, age, moving-violation history (if any) and payment information.  The company will send you a membership card, which you wave over a small panel on the windshield to unlock the car and start tracking the time you began using it.  Keys are inside and you’ll leave them there when you’re done. The companies negotiate parking rights with local governments that allow their vehicles to float freely within a city’s limits.  When customers want a car, they use a smartphone to locate the one nearest them and use a membership card to get in.

MOBILITY APP. In Germany, DriveNow and Car2Go have GPS and Internet connection in every car and their cars are highly visible and popular, especially among young people. Daimler is piloting Moovel, a mobility app that lets people plan journeys and buy travel tickets. Car2Go has expanded across Europe and North America, and now has 9,500 cars  and 500,000 customers in 25 cities including Amsterdam, London, Miami and Seattle.  DriveNow operates in five German cities and San Francisco, though its California operation offers less flexible parking.  Both Daimler and BMW are also working on products that let drivers book parking spots on the go.  Volkswagen, Citroen and Ford are also venturing into car-sharing while Uber is an order-by-app car service using professional drivers and luxury car options.

Zipcar lets you pick from a variety of vehicles including pickup trucks but, like Enterprise CarShare, you have to make a reservation via phone, website or mobile app, and return the car to the same spot where you picked it up. With Car2Go, which offers Smart subcompact cars, members can pick up cars without a reservation (though they can make one) and leave the car at their destination for the next driver.  Car2Go is designed for one-way rides to anywhere within a designated Home Area, and the average person uses Car2Go for 30 minutes at 38 cents a minute, $14 an hour or $73 a day. Zipcar offers a variety of membership plans that include monthly fees or annual fees ($60 a year) or daily charges like $8.25 an hour and $75 a day.  Each Zipcar reservation includes 290 kilometers a day while at Enterprise CarShare, 320 km a day and hourly fees starting at $5 an hour and daily fees at $76 a day, depending on the model, day of the week and time of day.

The services cover insurance and even gas, offering limited gas cards in the car for people to see and other incentives to encourage drivers to fill up the tank.  Users can be charged penalty fees for infringements like returning cars late, smoking in cars or losing car keys.

YOUNG IMAGES. Car-sharing ventures help the big companies to project young, environmentally friendly images even as they push back against emissions regulations, said Peter Weils, a professor of business and sustainability at Cardiff Business School in Wales.  The new services could increase environmental benefit as more electric vehicles are added to their fleets.  Car-sharing is also a way to reach out to potential future customers who shun car ownership in their 20s or 30s but feel differently later in life and the manufacturers hope they will remain loyal. Moreover, automakers can use car-sharing vehicles to try out new technologies such as parking-space location that will eventually be installed in the cars they sell or rent conventionally.

The big companies felt they had no choice but to jump into the car-sharing bandwagon, said Scott Le Vine, a research associate at the Center for Transport Studies at Imperial College London.  “They don’t want to be Kodak,” which went bankrupt when photography went digital. “They want to be in these spaces as soon as practical.” He added that it was “more lucrative to sell everyone cars, but they don’t want to be left behind when the market shifts.”  While some studies suggest that the growth of car-sharing results in a decrease in vehicle sales, others indicate that most customers either own a car already or would not have bought one anyway.

(Sources: New York Times and WSJ)

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