Automotive > Infotainment & Telematics Blog

RelayRides, OnStar at the Crossroads of P2P and Corporate Car Sharing

by Roger Lanctot | Jul 28, 2012

The latest news from the world of peer-to-peer car sharing was the announcement of the formal launch of RelayRides’ cooperation with OnStar. The partnership allows RelayRides members to make use of OnStar’s newly introduced open APIs to enable a car sharing experience without key sharing.
The announcement demonstrates the power of OnStar’s open API strategy while opening the door for owners of OnStar-equipped vehicles to the world of “autopreneurship,” to steal a made up word from the founder and CEO of France’s Buzzcar (and co-founder of ZipCar).  RelayRides regularly touts the ability of its members to rake in $600 or more per month from car sharing – a potentially mind changing prospect for car sharing skeptics, of which there are many.
(It’s worth noting that the Buzzcar car sharing model in France is of the peer-to-peer variety, not the corporate ZipCar or Car2Go approach.  The company is oriented toward face-to-face car sharing within local neighborhoods and communities.)
The emergence of the peer-to-peer model was enabled in part by vehicle connectivity technology, so the OnStar relationship makes sense.  Services such as RelayRides, GetAround and Wheelz initially required hardware to be added to cars to provide for card-based vehicle access, billing and in-vehicle storage of the physical key.  The on-board hardware also provided vehicle security and tracking.
Moving away from hardware
But services such as Buzzcar, Whipcar, Voiturelib and, now, RelayRides are moving away from a hardware-based model.  One reason, say industry participants, is the low frequency of rentals.  Only a high frequency model really justifies the installation of expensive hardware – normally provided at no cost to the car sharer.
An essential element of the new peer-to-peer model was the provision of a corporate umbrella in the form of RelayRides or GetAround to underwrite insurance, check and maintain membership credentials, handle billing and help connect car sharers with potential customers.  Several of the services integrate Facebook and Paypal into their solutions to support these functions.
The latest trend, though, is toward hardware-free vehicle sharing but with the requirement of a key exchange.  The peer-to-peer services – with or without hardware - are designed as an alternative to the corporate programs of ZipCar and Car2Go.
Hardware preferred for high frequency, low friction
One emerging player that is maintaining the hardware focus is Wheelz, currently available on four university campuses in California.  Wheelz, like RelayRides, is intended to enable and stimulate a “low friction” process for frequent vehicle rentals capable of generating significant revenue for the car sharer.  Students have lavished praise on the Wheelz model, according to company executives, including some who are using Wheelz to defray college expenses. 
Those sentiments are significant because ZipCar, an investor in Wheelz, has focused on college campuses with more than 250 universities around the U.S. equipped with ZipCar offerings.  (Bill Ford's Fontinalis Partners is another leading investor in Wheelz.) University students are an ideal captive audience of potential users seeking low frequency, short distance, temporary rides often in an urban setting. 
This also explains why car sharing is attractive for use around corporate campuses or for homeowners associations.  These settings provide a captive audience with a shared interest in car sharing.
Insurance remains an unresolved challenge
In addition to a communal shared interest, another essential element of the P2P car sharing proposition is insurance and it is as yet unresolved.  While the corporate parents offer various forms of protection for the sharer and the driver, there are a variety of unresolved issues, particularly in the U.S. where car insurance is a state by state scenario.  California, Washington and Oregon have stepped in to pass laws to allow the corporate parents to provide coverage for car damage or theft or for injuries or fatalities to drivers or others.
Published reports have revealed, however, that many insurance companies will not cover for damages caused when a vehicle is in commercial use.  Some insurers have been quoted as saying that their policies do not provide for such commercial uses and others have said they would drop coverage for anyone participating in these programs.
Despite this lack of support and the fragmented regulatory environment in the U.S., car sharing is being embraced around the world.  The peer-to-peer model is especially important, according to multiple industry participants, because of the personal or community connection of the car sharer and the driver.
In the new world of car sharing – part of the so-called “access economy” or “collaborative consumption” – participants are less inclined to abuse that which they are “borrowing” from a member of the same community.  (Car sharing is analogous to home rentals popularized by Airbnb.)  In contrast to Airbnb, however, the car sharing relationship of the face-to-face variety is even less likely to incur abuse of the asset since, unlike an Airbnb rental, the car sharer in the case of Buzzcar, for example, is likely to rent the same car from the same neighbor multiple times.
New telematics value proposition
For OnStar, the RelayRides relationship is a way to enable a new value proposition on the telematics platform.  OnStar will allow owners of GM cars to make money sharing their car.  At the same time, the RelayRides proposition can attract lapsed OnStar subscribers to restore their $19/month subscriptions to take advantage of the new service.
Of course, OnStar’s open APIs are intended to enable an unlimited range of new applications capable of adding value to the telematics platform and enable the service to retain existing subscribers, lure back past subscribers and reduce service churn.
At stake for OnStar is a total potential user population – approximately six million subscribers plus approximately nine million with hardware but no active subscription – of 14M-15M vehicles.  All that is required to enable the RelayRides experience is to reactivate the $19/month subscription to enable access to the GPS location technology and remote door unlock function.
In essence, OnStar replaces the RelayRides hardware.  But RelayRides, like other P2P services, is moving away from the hardware requirement, which is provided and installed at no cost to the driver.
Can RelayRides and OnStar build user communities?
The no hardware move by RelayRides, part of the company’s attempt to be the first to take the service national, opens up participation to any and all who may want to join.  The challenge for RelayRides, though, will be to build community nationwide.  The trade-off for an OnStar customer reactivating his or her subscription to enable RelayRides sharing is whether the potential revenue enabled by the “low friction” rental experience justifies the monthly subscription.
The pursuit of communities of shared interest, as in the university campus deployments, reflects the “special sauce” of car sharing: serving a collective good.  RelayRides, and by extension OnStar, are likely to face challenges stimulating the same community by opening the offer to the entire U.S.   It may also make it harder to fine tune the RelayRides car sharing model with the company immediately exposed to regional driving preferences spanning the country.
The OnStar relationship has the potential to enable a more viral expansion of RelayRides with the support of such a large corporate partner.  It also opens GM up to a new market segment and, possibly, new customer relationships.  Checking available RelayRides in my neighborhood revealed a paucity of GM vehicles, suggesting that GM – by tying up with RelayRides – is tapping into an entirely new demographic segment.
A lack of marketing
But the lack of any targeted broadcast advertising or even a social media campaign suggests that GM has yet to determine how it wants to tap into the new relationship.  In the end, the OnStar/RelayRides deal will only work if GM and/or RelayRides are able to build communities of users around the new program now that the infrastructure is in place.  This suggests a go-slow approach, which is a good way to characterize the growth of car sharing overall.
Perhaps more importantly, the RelayRides relationship launches GM into the realm of new modes of vehicle ownership in a world where young people are beginning to eschew driver’s licenses, according to a study released last week by the University of Michigan.  Parents could send their children off to college with a new GM car and OnStar and RelayRides subscriptions.
The opportunities for both RelayRides and OnStar are substantial.  Thus far car sharing services have been fairly limited in scope and, as a result, represent only a tiny proportion of vehicles on the road. 
One of the barriers to the adoption of car sharing has been the insurance implications along with people’s unwillingness to share.  With the onset of the collaborative consumption culture along with economic pressures and the changing demographics of vehicle ownership, the stage is set for a wider embrace of vehicle sharing.
Some in the industry suggest this is the main motivation behind car company interest in car sharing.  With increasing urbanization, the thinking goes, and early indications of declining rates of vehicle ownership, the industry is seeking to hedge its vehicle ownership bets.
The volume of cars that are currently registered in car sharing programs remains small, but these are early days and now is the time to gather information regarding vehicle sharing behavior and requirements.  Car sharing is enabling the ultimate on-demand model for vehicle ownership, while maximizing the productive use of an asset that is likely to endure for more than 10 years.
The vision unfolding at RelayRides is of car sharing on a mass scale, unlimited to a particular city, state or college campus.  Entering any zip code into the RelayRides Internet interface will produce a roster of available cars within a few miles being shared by nearby neighbors.
The OnStar relationship has the potential to open up an even larger spigot by allowing subscribers to leverage their existing OnStar subscription to produce income from an otherwise idle vehicle.  The RelayRides value proposition is a potentially powerful ownership alternative for GM dealers to share with customers and may even set the stage for dealers to establish vehicle sharing businesses of their own.
It might be useful if GM were to help RelayRides, and the industry, sort out the insurance issue.  Other car sharing organizations have been more cautious in their expansion plans because of the state-by-state insurance issues.  It is not clear that RelayRides has satisfactorily resolved this issue – in spite of already offering a nationwide program. 
If the insurance issue can be resolved in the U.S. and elsewhere, P2P and corporate car sharing plans hve the potential to resolve a wide range of issues around the wider challenge of urban mobility, traffic congestion and pollution.  Ultimately, car ownership may be reduced to a pay-per-use scenario.
In some respects it is amazing that car companies such as GM and Daimler (Car2go) have embraced car sharing since the number of vehicles involved is so low and it directly impacts vehicle sales.  What is more likely is that the negative impact on vehicle sales is, in fact, a short-sighted perspective.
With the enhancement of a connected vehicle platform, car sharing becomes a telematics value add and may, in fact, expose the non-car-owning population to the car owning experience.  Maybe by enabling car sharing car companies will stimulate wider car ownership. 
The more likely scenario is that car sharing is the precursor to a redefined vehicle ownership experience sweeping developed countries and fundamentally altering industry economics.  The rosy version of this vision suggests greater revenue and profit opportunities for OEMs in this brave new world if OEMs are able to cultivate their piece of the action.
The greatest challenge for GM/OnStar will be building user communities around the car sharing application.  Judging by the limited participation of GM vehicle owners in the current RelayRides offering, GM has a great deal of work to do to leverage the RelayRides platform.  The RelayRides relationship is a real test of GM's ability to adopt new thinking and, potentially, put its traditional vehicle sales model at risk.
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