Big Players Move Into The Car-Sharing Space

Start-ups may rule in the sharing economy but car sharing offers a ray of hope for established companies looking to profit from this new way of thinking about ownership. Though still a relatively new phenomenon, as demand for car sharing increases traditional companies like car rental firm Avis, which purchased Zipcar in March for $500 million, French industrial conglomerate Bolloré, and car maker Daimler Chrysler, are all getting into the business.

The attraction? Some 2.3 million people, including 940,000 in Europe, used car-sharing services in 2012, according to a recent study by consultancy Frost & Sullivan. The consultancy is forecasting that 15 million Europeans will use car-sharing services by 2020.

“To reach that 15 million number consumers need to be educated and they must change their behavioral patterns,” says Martyn Briggs, Frost & Sullivan’s program manager, mobility.

Many people still have not heard of car sharing and don’t realize what the benefits of the service are, according to a Frost & Sullivan survey of more than 2,300 people in the U.K., Germany and France, which was released in May. The study found that more than half of early adopters are under 35 and a large percentage don’t own cars.

Zipcar has been working since 2000 on educating consumers and convincing them that cars can be part of the sharing economy. Along the way the company has attracted 750,000 customers in 20 major metropolitan areas and more than 300 college campuses in the U.S., Canada, U.K., Spain and Austria.

“We are looking at new markets in Europe and there are some where a Zipcar offering in the near future makes sense,” says Zipcar Europe President Frerk-Malte Feller, a scheduled speaker at Le Web London 2013. He declined to specify which cities or countries he might be targeting.

Key to Zipcar’s success so far — the company had $279 million in revenue last year, 15% more than 2011 and more than double what it had three years ago, and its gross profit margin rose by a third last year to 6.2% — is that the service has managed to be many things to many people, says Feller. Some come for the money they can save by not owning a car while others are won over by the convenience of always having a car parked around the corner.

While the details will differ from service to service, the basic format of most car-sharing services is the same. You pay a membership fee (perhaps yearly) and then pay either by the hour or day – and sometimes even by the minute – to use a car. Pick-up and drop-off spots are scattered around the city and can be reserved, sometimes as little as 15 minutes before use, either by smartphone or through a computer.

“We’re not assuming the next market we enter will be one that does not already have a competing car-sharing service,” says Feller. “We look to see if we can offer a better car-sharing service than what already exists.”

There is no clear, winning strategy, says Frost & Sullivan’s Briggs. “A lot of the car-sharing companies want to go where there is no service yet, but it’s hard to come in as a start-up and the challenges are big,” he says. “If you go to a city where people are already using car sharing the psychological barrier is removed, but once people are familiar with a brand it is hard to win customers so the best way to compete is to offer locations that are more convenient for customers of the existing service.”

When it comes to attracting users, car-sharing services can try to compete on price, but technology, ease of use, location and number of pick-up/drop points are key. Just ask Stephane Beder, a Parisian consultant who started using Autolib’ — a subscription-based car-sharing service operating in the city of Paris — after losing access to a company car when he changed jobs a year ago.

“I was pleasantly surprised how quickly they were able to offer a very extensive network and they keep adding more spots and more cars,” he says. “That is critical because the fewer places you have to pick up and drop off a car the lower the value of the service.”

“When I no longer had the company car I thought I’d give car sharing a chance and it has been terrific,” says Beder, who uses Autolib’ as part of an integrated package of transportation options that includes bike sharing, buses and the metro.

“From a cost standpoint it is great. Parking in Paris is already so expensive even before you add insurance, petrol and the car itself.”

As might be expected with a car that gets used by many people a day, there can be bumps in the quality of the service, including the occasional bug in the computer system and the lack of cleanliness of the cars. “The cars are getting increasingly dirty,” says Beder. “I don’t know what people do in the cars, I don’t want to know.”

Bolloré — which received €75 million in financing from the European Investment Bank to speed up expansion of the Autolib’ service throughout Paris — has sold 79,000 subscriptions since launching its electric car service in the French capital in December 2011. So far the service has racked up almost two million rentals from its more than 700 stations.

Daimler Chrysler, which first launched its Car2go service in Germany in 2008, now has more than 350,000 customers using its Smart vehicles in about 20 cities, including Amsterdam, Vienna, Lyon, London and Birmingham in Europe and San Diego, Seattle and Toronto in North America.

While the U.S. and Europe are the main markets at the moment for car sharing, there is strong growth potential in Asia Pacific where there are about 300,000 users, says Briggs.

“The mindset in Asia Pacific is that people own vehicles, but governments in the region are starting to realize the benefits of car sharing including the role it can play as a partial solution to congestion and pollution,” says Briggs. “A lot of the car-sharing companies want to go there, but the challenges are big.”

While only companies with deep pockets can afford to roll out fleets of vehicles across the globe that does not mean that there is no room for start-ups in the car sharing space. Some are actively building less capital-intensive peer-to-peer car-sharing businesses that allow people with private cars to make their vehicles available through an online platform.

For example, RelayRides, which has thousands of private cars signed up in more than 1,500 U.S. cities, has raised more than $13 million in venture capital funding from Google Ventures, Shasta Ventures and others. Last month it acquired Wheelz, a peer-to-peer car sharing platform founded in 2011 that lets people quickly reserve, find, and unlock a car from a smartphone without ever having to meet the owner.

Frost & Sullivan say this type of car sharing is likely to co-exist alongside car sharing offered by the likes of Zipcar and Daimler Chrysler.

Watch this space because just as hotels and taxis aren’t ready to cede their businesses to the likes of Airbnb and Uber, it seems start-ups and venture capitalists aren’t ready to hand over the keys to the car-sharing market to rental car companies, conglomerates and car makers




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