The Impact of Car Sharing on the World As We Know It



Peter Els
04/16/2014

According to "Commuting in America 2013", the national report on commuting patterns and trends, the number of zero-car families has been on the rise since 2007. Today, the rate of people bypassing vehicle ownership in favor of a shared commuting experience is roughly 10 percent.

While that's good news for cities dealing with congestion, some analysts are sounding the alarm that all of this shared consumption is going to hurt car sales.

In a report released in 2014, Alix Partners, a consulting and business advisory firm, confirmed a half million vehicle purchases in the U.S. have already been lost due to the growing popularity of car sharing programs like Zipcar and Relay Rides. And this trend isn’t unique to America; car-sharing across the globe is gaining popularity.

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A recent analysis by Frost & Sullivan estimates the number of vehicles in car-sharing fleets in the European market currently stands at about 2,000 vehicles, whilst predicting that by 2020 this could grow to between 75,000 and 100,000 cars. The trend being driven by providers such as the leasing divisions of the OEMs, rental companies, car-sharing organizations (CSOs) and technology providers which continue to expand services.

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Image credit: www.insteading.com

Commenting on the recently released report on car sharing trends in America, Mark Wakefield, managing director at AlixPartners and leader of the firm's Automotive Practice in North America claimed:"Our study suggests that Americans' willingness to avoid vehicle purchases due to growing car-sharing options is higher than many have thought". Unlike many previous studies about the popularity of car sharing, the Alix Partners study specifically looked at how quickly these programs are impacting auto purchases in ten cities.

The effect of car-sharing on new vehicle sales

The study found that, in bellwether markets, 32 personal-vehicle purchases were avoided through each car-sharing vehicle, with further projections suggesting that 1.2 million vehicle sales could be lost in America by 2020.
Although the report hyped-up the lost sales to the industry, the loss is in actual fact very minor: Vehicle sales in America are forecast to top 16 million in 2014 alone; so if the industry loses 1,2 million new vehicle sales in a period of more than 6 years it can hardly be seen as a crisis.

Interestingly the report also found that:
• The number of drivers using car-sharing services will grow from less than 1 million in 2013 to 4 million by 2020.
• For every car in its fleet, the average car sharing service has about 66 members, a number that is expected to grow to 81/car by 2020.
• Lower costs and less hassle is driving car-sharing popularity; not environmentalism or fads.
• Car sharing is expanding, but growth is currently limited to affluent, urban areas, especially those near universities.
• Almost half of regular car share users end up not buying a car.

Furthermore, according to Susan Shaheen and Adam Cohen, from the University of California Berkley, a survey of members of all major North American car-sharing organizations found an average vehicle mileage decline per year of 27% (observed impact, based on vehicles sold) and 56% (full impact, based on vehicles sold and postponed purchases combined). This equates to an average reduction of 1.1 billion miles driven for members of classic neighborhood car-sharing (as of January 1st, 2013).
However, this is still relatively small compared to the Federal Highway Administration’s estimate of 2.9 trillion miles driven in the U.S. in 2012, and therefore the impact on reduced emissions will also be relatively insignificant.

The biggest challenge to the automakers’ new car sales is that the economics of car sharing are so favorable. A Zipcar user who only needs to drive a few times a month could save hundreds of dollars by renting from the Avis-owned sharing pioneer. Not only are easy hourly rentals possible, but importantly the car can be collected from one of numerous pick up points present in most major cities.

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Image credit: www.planningengineer.wordpress.com

It’s not as if automakers are unaware of the trend: Mercedes-Benz parent, Daimler, is behind the innovative Car2Go service, which rents out Smart cars using a flexible model similar to Zipcar. And BMW has backed DriveNow, while GM for its part has facilitated owners renting their vehicles through RelayRides using OnStar technology.
But traditional car-sharing still requires the commuter to make their way to where the vehicle is parked and ultimately parking it again on completion of the trip. However ridesharing service provider, Uber’s, twist on car-sharing will have a driver collect the passenger and take them to their destination – much like a taxi would.

The company has raised more than $360 million, is expanding across the globe, and signing up new drivers to meet the demand it generated after a recent fare cut. While it isn’t the only smartphone dispatchable taxi service, it’s doing everything it can to become the branded, worldwide leader.
Mark Wakefield of Alix Partners believes this has most especially been made possible through the application of smartphone app technology that lets a commuter reserve a Zipcar or an Uber within seconds.
In this age of consumer technology, car-sharing services have been quick to apply the appropriate solutions to further enhance the user experience.

Technology available to car-sharing services

Most of the major service providers are exploring methods of applying some or all of the following technologies:
• OEM fitted car-sharing telematics technologies. This would most likely first occur in fleet vehicles. Historically, vehicle manufacturers have been adverse to "buying-back" vehicles that have been fitted with third-party technologies. However, with the entry of automakers into car-sharing (e.g., car2go and DriveNow), telematics technology could be factory-fitted to fleet vehicles. Already General Motors’ OnStar system is used to support RelayRides.
• Telematics technology fitted across entire car rental fleets would facilitate vehicle cross-flow between car-sharing and traditional rental services; resulting in added flexibility to use the entire fleet for daily, hourly, attended-access, and unattended-access as vehicle demand for these services fluctuates.
• Connected car technologies would mean that car-sharing vehicles would be connected to the Internet, "cloud," and sensor networks. Such technologies would improve vehicle operation, as well as ecodriving (more efficient routing to avoid traffic, steep inclines, or stops at traffic signals).
• Autonomous driving vehicles such as the much discussed Google taxi would mean that a service, such as Uber could remotely deliver and retrieve vehicles to commuters. Functions such as self-parking and self-recharging, in the case of electric vehicles, would probably be the first to find their way into the fleets.
However not all is plain sailing in the car-sharing environment: There are important questions around insurance and liability that have not yet been answered.

The insurance industry’s concerns surrounding car-sharing

Particularly in America insurers aren’t entirely certain what to make of increasingly popular sharing arrangements. Or more pertinently, auto insurers aren’t too sure how to make customers pay for the extra coverage they say is needed in car-sharing arrangements.

"It’s very clear in California: If you drive your car and make money from it, you need a commercial license," Pete Moraga, a spokesman for the Insurance Information Network of California, told the San Francisco Chronicle earlier this year. "But because it’s so new, insurers don’t ask the question, which opens up the process to fraud."
Ride-sharing services typically provide $1 million worth of excess liability coverage for the drivers. But well-publicized accidents and lawsuits have raised questions about the nature of the coverage. A Consumer Reports post, published earlier this year warned:

That million-dollar excess liability insurance covers passengers, pedestrians, other cars, and property; but doesn’t cover injuries suffered by the driver or damage to his or her car-cum-taxi if there’s an accident.
Predictably, risk adverse car sharing companies such as Lyft, have responded by bumping up coverage and even forming a new Peer-to-Peer Rideshare Insurance Coalition in order "to ensure a safe and trusted future for the emerging peer economy."
Despite the concerns of car-sharing on vehicle sales there’s no doubt that, driven by cost and convenience, more consumers are likely to forsake owning a vehicle. Is car sharing going to make a significant dent in OEMs revenue? Not likely!


Sources:

  • Negative effect of car sharing on vehicle purchases – AlixPartners
  • Innovative mobility car-sharing outlook, market overview, analysis, and trends– transportation sustainability research center - University of California, Berkeley (Susan Shaheen, Ph.D. and Adam Cohen).
  • Does each car-sharing vehicle really prevent 32 car sales? - http://green.autoblog.com (Sebastian Blanco)
  • Pricier auto insurance for everyone - http://business.time.com (Brad Tuttle)
  • Zipcar, Uber and the beginning of trouble for the auto industry – Forbes (Mark Rogowsky)

Peter Els is a technical writer for Automotive IQ

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