How car sharing will impact US economy and what car makers can do about it



Victor Haydin
11/14/2018

Those of you tracking technological breakthroughs in various businesses have surely marked that automotive industry is one of the most favorable for bringing to life the boldest tech-based ideas. Car sharing is definitely one of those. The shared mobility segment develops extensively in different regions and North America is not an exception. By 2021, there will be 6 million Americans registered for ride sharing services and around 600,000 users making multiple trips per month.

Source: Self-Driving Vehicles, Car Sharing, and the Urban Mobility Revolution by BCG

The impact of car sharing on the US economy can hardly be overestimated. In the last year, total revenue of car sharing business in the country has reached the point of $28.6 billion. The rapidly increasing number of Americans willing to borrow a car is closely linked with another two car sharing trends in the US. First, the country is about to lose its longstanding status of the nation with largest privately owned car fleet. Second, the automation technology is becoming a decisive force shaping the tomorrow of auto industry and related business.

Reasons why car sharing future is really bright

If you are skeptical about the future of car sharing, take a thorough look at the reasons making car borrowing undeniably popular. First, shared mobility is an exceptionally effective solution for the challenges associated with rapid urbanization. Well-developed car sharing infrastructure means not only more space saved for pedestrians and other traffic participants but can also fill the gaps in public transport services. As an illustration, in Chicago, the local authorities have already saved more than $7 million by investing in the complex ride sharing network development.

The second reason stems from the growing market demand for ride sharing services. It is the generation Y consumers that give car sharing companies biggest promises. Young people are becoming the major social force shaping market requests in the United States. Affordability, as well as high maintenance costs, are enough for them to dissuade from owning a vehicle and opt for a shared mobility alternative.

The last big trend contributing to segment's fast growth is the recent technological breakthroughs in automotive business. These include the extensive development of self-driving technology and advanced safety features. Until recently, almost 80% of Americans admitted they would be rather afraid of having a ride in an autonomous vehicle. But the joint efforts of car sharing providers, original equipment manufacturers (OEMs), and software developers are changing the issue. The recent research highlights that more and more people in the United States are willing to share ride in a fully or partially autonomous vehicle.

Source: Self-Driving Vehicles, Car Sharing, and the Urban Mobility Revolution, BCG

What car sharing brings for car makers and related fields

So what do the car sharing industry trends in 2018 mean for car makers and OEMs? First, in case the trend will remain stable for the next decade, almost a third of the expected increase in vehicle sales from urbanization and macroeconomic growth likely will not happen because of shared mobility. Yet, the statistics are not as bad as it might seem for car makers and OEMs.

Good news: the demand for privately owned vehicles is likely to increase substantially in other regions, including primarily Asian market. In addition, the shared vehicles are expected to be utilized more often compared to the private fleet cars. It means that the US car sharing providers will have to consistently renew their fleets.

Source: How shared mobility will change the automotive industry, McKinsey&Company

Today, the substantial economic benefits of using the car sharing app or websites are received primarily by those customers who are open to carpool being ready to share auto with the other passengers. At the same time, peer to peer ride sharing remains rather unattractive for the solo-travelers for whom a comfortable trip is most important. Chances are that the autonomous driving technology can become a real game-changer here.

Imagine this: Lyft, Gett or any other p2p car sharing service will start using self-driving cars for one way car sharing. With the costs saved on driverless technology, the car rental providers will satisfy the end users with an inexpensive top-notch quality service that will meet the highest expectations of the customers.

Last year, Uber presented Volvo XC90 SUV as its first self-driving car available for car sharing app users. But the growing optimism was shadowed by a March accident, in which a self-driving Uber vehicle killed a local in Arizona. Let's make it clear: OEM's, car makers, and technology developers still have a lot of work to be done before the car sharing users will start to trust a self-driving shared vehicle.

Challenges ahead and solutions to address them

Besides the vulnerability of customers’ trust, the challenges faced by industry players involve the poor car rental infrastructure in rural areas and availability of less expensive commute options based mostly on a carpool principle. In addition, car rental companies and related businesses should make services more attractive to the customers interested in making errands or multistop trips.

So, what options are available for the car makers and OEM's in the coming era of shared mobility? The basic strategic approaches are the transformative and status-quo paths. Opting for more aggressive transformative option means that a car maker would have to reorient the manufacturing model to producing purpose-built vehicles in cooperation with the shared service providers and tech companies. Another transformative option implies launching own car borrowing service. By contrast, the status-quo path is about finding the ways to attract new customers interested in the traditional car ownership model.

The component suppliers and other related businesses can, in turn, reinforce their competitiveness by means of offering the product testing services as well as elaborating the advanced data-driven navigation, path planning, and autonomous driving solutions. The timely strategic decisions based on demand and market data can help both local and national players maximize the benefits stemming from the rapid increase of car sharing popularity.

Afterword

Car sharing has a tremendous potential in the United States. The trend of growing demand for shared mobility means that the cities and national economy have a chance of becoming more sustainable. Needless to say that the combination of shared economy principles and top-notch technological solutions opens a plethora of opportunities for the car makers, OEM's, and related businesses. Automotive companies that will be the first to reorient their business models will eventually become the industry trendsetters and major beneficiaries of the ride sharing segment.

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