The Death of Car Sharing? Time to Pivot.
Tags: Mobility, Carshare, Cars, Marketing, Automotive

Car sharing providers have seen better days. In the last few months the industry has been confronted with a plethora of studies, articles and news headlines proclaiming the death of the business model. Losses have been piling up, expansions halted, and CEOs of leading car manufacturers have once again declared a shift in focus back to their core business.

The core business itself of building cars faces fundamental challenges. It’s a business that has subsequently decreased in profitability and is burdened with enormous investments into new, cleaner drive technologies. It’s a business that needs huge investments into digital infrastructure, to enable an autonomous future, but also to rebuild its crippled legacy IT infrastructure, which is a prerequisite for state-of-the-art manufacturing, sales, maintenance and customer experience. It’s a business that is facing the most rigid regulations it has ever encountered in its more than 130 year existence. But more importantly it is a business that has lost the trust of the people, particularly of the next generation of consumers, a business entirely based on a product that many now see as a commodity and no longer as the pinnacle of one’s self-actualization.

Given these challenges, focusing on their core business needs to be top of the agenda for auto CEOs. But does that sound the death-knell for car sharing? Or maybe we all were wrong about what modern, car-powered mobility services should look like. Therefore, let’s begin focusing on pivoting the car sharing business model together, before we doom it once and for all. To start this discussion here are some questions to consider while redeveloping the business model of car sharing:

1. Who should be the car sharing customer?

As with any contemporary platform business model, car sharing providers started by looking at the customer first. The customers that providers have singled out as most promising are the next generation of modern, urban users who want to get from A to B as quickly, comfortably and efficiently as possible. But what if these are the wrong customers? Car companies today sell more than 50% of their cars to fleets. With some car models it’s a whopping 70–80%. So why should car sharing solutions focus on the needs of a target group that neither prioritizes cars over any other form of mobility or even represents major market potential?

Therefore the first and most impactful step to completely rethink car sharing is to focus on the needs of companies, organizations or municipality fleets. This approach would add significantly more scale to the business and represent a considerably higher revenue as well as volume potential for car manufacturers. Air taxi start-ups like Volocopter for example, aim their marketing directly at cities and municipalities. Let’s shift our focus and transform the business model from B2C (Business To Consumer) to a B2B (Business to Business) or B2M (Business to Municipalities) focused model.

2. What is the right car sharing business model structure?

Until now the business model of most car sharing providers is to fully or jointly own all the infrastructure, as well as car fleets and when offering their services directly to users. What if the business model was to offer an open, neutral mobility platform that could be used to connect existing infrastructures and fleets? An ecosystem approach that opens up to different market players, manufacturers and customers and therefore offers more scale, enables more efficient processes and serves more use cases. What if it’s not about the users paying by minute or miles, but about the organisations, fleets and municipalities paying for the value the infrastructure brings them, by offering the most efficient use of individual traffic through data-driven fleet allocation? What if car manufacturers offer a full suite of products and services to big institutional customers, including planning, implementing, financing and maintaining the mobility infrastructure? Contracts would be long-term with strong log-in effects and predictable returns across the value chain. And there could even be additional ways to create revenue through building in performance-based remuneration, if for example the car sharing providers have shortened individual trip times, reduced individual journeys to a minimum, lowered accident rates or even lowered CO2 emissions. These are just a few examples for where revenues and profitability could come from.

3. What cars do they offer?

Most car sharing services offer passenger cars for urban use — small and compact, and sometimes even convertibles. This mix of offers seems obvious for the smart urban user. But when we for example look at the needs of fleets, it would make more sense to offer medium-sized sedans or station wagons for longer distances, as well as a range of commercial vehicles such as transport vans for last mile deliveries. Moreover, most car sharing fleets are still operating mainly with combustion engine powered cars, instead of hybrid or electric cars. Given tightening emissions regulations and the fact that many cities are already discussing citywide bans of combustion engine cars, fleets of emission free vehicles would solve two problems. Firstly large fleets of fully electric cars could help manufacturers reach their fleet emission targets faster and hence avoid high penalties. Secondly and more importantly these fleets could reduce total CO2 emissions in inner cities. All in all, apart from the Mercedes-Benz Vans URBANETIC concept, which consists of fully electric and autonomous fleets of skateboard chassis and passenger or cargo cells for private and commercial use, we haven’t yet seen truly visionary and holistic concepts for car sharing solutions.

4. What services are offered?

Current car sharing applications are designed for the car sharing user only. There’s nothing wrong with this in an era of user-centered design. But what if the users are not only car drivers, but also fleet managers? Fleet managers need a suite of applications to help them dynamically plan and efficiently operate their fleets to create maximum effectiveness for their business or mobility needs. For them car sharing providers should complement their offer with smart, AI powered applications like predictive maintenance suites, Total Cost of Ownership (TCO) managers, Return On Investment(ROI) calculators, mobility demand maps and projections tools.

5. Where are you competing?

Car sharing and mobility providers are keen to stress that their services are complimentary to public transportation systems and do not cannibalize them. But studies have shown that car sharing causes public transport users to defect. What if car sharing providers acknowledge this fact and focus their efforts not on cities that have a well set up public transportation network and already jammed roads like London, Paris and Berlin, but instead on cities where car sharing could be part of the solution? Cities that are widely spread out and have almost no, or insufficient public transportation systems. Or what about medium-sized, rapidly growing cities that can’t afford an expensive subway or tram infrastructure.

These first observations and ideas show how many exciting opportunities are still out there when rethinking the car sharing business as a whole. The business model still has a lot to offer if we look at it from another angle starting with the customers, their needs and the value car sharing can bring to them and ultimately car manufacturers’ top and bottom line. So let’s start to pivot the system together.

About the author:

Cornelius Koelblin is the Managing Director of BBDO’s Düsseldorf office — a creative brand and comms agency with accounts that have international reach, from where he consults global icons such as Ford and Continental. Before joining BBDO, Cornelius worked across various positions at both BMW’s Munich and Beijing offices. He was most notably responsible for the brand and comms management of BMW’s electric car and mobility services sub-brand BMW i.

References:

Kyriasogloiu, Christina: Auf Schleichfahrt. Moia & Co. VW, BMW verlieren Glauben an Ihre Mobilitätsdienste. In: Manager Magazin November 2019

Fasse, Markus / Hubik, Franz: Den großen Hoffnungen folgt die Ernüchterung. Die Euphorie der Autobauer bei Car Sharing, Mitfahrdiensten und Taxivermittlern ist verflogen. In: Handelsblatt 28.10.2019

Peine, Astrid / Rodewyk, Vincent / Rodriguez Gil, Angel / Steinmann, Wilhelm / Stolle, Wulf: The Demystification of Car Sharing. AT Kearney 2019