Every conference has a presentation that seizes the moment in a series of slides that slices to the heart of whatever industry transformation is afoot. Such a presentation was delivered at Telematics Europe in Munich by Sebastian Hofelich, managing director of BMW’s DriveNow car sharing division.
I owe a debt to Herr Hofelich. I will be leading a panel discussion on the topic of car sharing at the Los Angeles Auto Show’s Automobility conference on Tuesday of this week. That discussion will include Rachel Bhattacharya, director of Maven Commercial for General Motors, and Matt Jones, chief product officer of the moovel group for Daimler.
“Carmakers Confront the Change Challenge”
4:20-4:50 – Technology Pavilion @ the Los Angeles Convention Center
http://automobilityla.com/schedule/
Herr Hofelich home in on the core existential question behind car sharing: Whether shared vehicles will negatively impact vehicle sales. If shared cars will negatively impact vehicle sales, then why are car makers embracing this solution?
Car sharing rose to prominence approximately 10 years ago with the onset of ZipCar, now owned by Avis Budget Group. Car sharing quickly wedged its use case between daily or weekly car rental services and taxis and as an alternative to car ownership.
Shared cars are seen fulfilling the need for hourly ad hoc transportation needs and have spurred the development of carpooling/ride sharing services like BlaBlaCar and Chariot. Shared cars and shared rides remove all of the unpleasantness of car ownership while still using a vehicle to solve a transportation need.
But the question remains – have car sharing services negatively impacted sales of new and used vehicles already or will they in the future. Car makers have come to view car sharing as a solution to several problems associated with car owning including low vehicle usage, limited available parking, congestion and emissions.
As reflected in the DriveNow presentation at Telematics Europe, shared cars see three times the usage rate of owned cars and they lower the demand for parking while reducing emissions (as such fleets increasingly emphasize EVs) and congestion. But nobody really knows if vehicle demand is being tamped down, even slightly, by car sharing services.
Boston Consulting Group has forecast that by 2021 car sharing services will reduce vehicle demand by 550,000 units causing a net revenue loss of $7.4B to car makers. Frost & Sullivan goes further, forecasting that car sharing services “could” remove 5.33M vehicles from the road by 2025.
No one really knows the truth and the global picture of vehicle demand is mixed. Vehicle demand is more immediately impacted by underlying economic forces such as rising employment or recession. Still, if the researchers are right, including the University of California at Berkeley, Technische Universitat Dresden, WiMobil Study (BMW, Deutsche Bahn, etc.), DriveNow/Car2Go and StadtWien, how great will be that impact? Even BCG foresees only 550,000 lost sales – a drop in the 100M-unit bucket of global new vehicle sales.
SOURCE: DriveNow
The pivotal two slides in Herr Hofelich’s Telematics Europe presentation included a slide showing the conclusions of the five studies noted above that car sharing services were causing consumers to either not buy a car or to sell their own car in exchange for access to shared vehicles. The second slide drawn from DriveNow research showed the modal split of transportation for DriveNow users vs. non-DriveNow users.
DriveNow users reported using the BMW car sharing service for 10% of their transportation needs with substantially higher percentages for public transportation, walking and bike use vis-à-vis non-DriveNow users. DriveNow customers use an owned vehicle for a self-reported 31% of their transportation needs vs. 56% for non-DriveNow customers.
The challenge in forecasting the impact of car sharing arises from the fact that organizations promoting the use of shared cars are obliged to stimulate demand. It is not enough to put cars on the street and in parking garages and expect the vehicle-deprived to seek these vehicles out.
Marketing and advertising dollars must be spent to create and maintain mobile apps and subscription services to build a framework for usage of these vehicles. Subscriptions are necessary in order to keep pushing and prodding users with offers and incentives. The key to the car sharing game is creating awareness and demand to establish a sustainable level of vehicle use.
This means that the companies entering the car sharing business have their thumb on the scale. The normal, latent consumer demand for car sharing may be insufficient to support a service. Service providers have to stimulate that interest and drive consumers to the sharable vehicles.
There is also the issue of regulatory action and the interests of host cities to be taken into account. Cities are themselves just beginning to come to terms with setting their own objectives and boundaries for shared vehicle use.
Finally, there is the question of numbers. The typical city seeing the onset of car sharing might have several hundred cars – maybe as many as a thousand – in total from multiple operators. The long-term objective might be to restrict private vehicle use or ownership within city limits or within certain part of the city. These decisions have yet to be made.
Even longer term, maybe those shared cars are eventually capable of automated operation. Driverless shuttles are already proliferating around the world with 19 such fleets currently in operation. Maybe shared cars are a precursor to an entirely new, ad hoc public transport scenario to unfold over the next decade or two.
The bottom line is that the car sharing gambits of today – and the tens of thousands of cars involved (not millions!) – represent a bold experiment intended to foster data collection and consumer behavior comprehension and modification. No one knows how or whether vehicle sales will be impacted, but no car maker wants to miss out on what may be the next phase of human transportation.
See you at Automobility at the L.A. Auto Show to discuss in more detail. And "Danke sehr!" Herr Hofelich.