Will car sharing get a post-COVID second wind?
27 November 2020
27 November 2020 The sharing economy and car sharing are sociologically attractive concepts. We seek to live more sustainably, and digitally-enabled business models have increased accessibility to sharing solutions. On the other hand, car sharing (and ride hailing) have failed to reduce road congestion or the number of cars in operation. They share another joint challenge: they struggle to become profitable and have been crushed through the pandemic. Dr. Christof Engelskirchen, Autovista Group chief economist, shares his perspective. The sharing economy is driven by a desire to connect with a community, to declutter, to increase flexibility and to live more sustainably. It is often facilitated by community-based online platforms. Car sharing is a logical extension of the sharing economy and has grown in popularity over the past 10 years. We differentiate between three types:
- Free-floating car sharing, where cars park on public roads within a geo-fenced area. This service exists almost exclusively in larger cities. Smaller cities (<500,000 inhabitants) do not attract free-floating car-sharing services due to expected low utilisation rates. Pre-booking is not possible;
- Stationary car sharing, where drivers pick up cars and return them to dedicated locations. Pre-booking is usually required. Peer-to-peer car sharing (e.g. via Zipcar or Turo) falls under this category as well; and
- Ride hailing. This can be peer-to-peer based or professional-service ride-hailing (e.g. Uber or Lyft). The difference to the traditional taxi ride is that it is fully online-enabled and cheaper. Depending on the supplier and business model, pre-booking is possible. In peer-to-peer-based business models (e.g. Blablacar), pre-booking is usually required.
- Low utilisation rates – particularly problematic in free-floating car sharing as more cars are required than in a stationary setup to allow for flexible access. Drivers use free-floating car sharing for shorter trips, which brings utilisation down;
- High costs for parking – particularly challenging in free-floating car sharing, as these cars park on public roads or in publicly-accessible parking garages;
- High costs related to mistreatments, service and cleaning. Higher-frequency driver changes add to the challenge. Cars need to be regularly cleaned, often daily or on an ad hoc basis;
- Additional costs for relocating cars. Cars need to be regularly re-distributed within the network as clusters form, e.g. at airports in the morning. This requires a human being to pick cars up from remote locations and put them back into those areas that would attract most drivers to the car. This is a daily logistical challenge for free-floating car sharing but affects stationary car sharing as well;
- Cars depreciate more and faster in a shared-driver setup. Remarketing results are substantially lower and refurbishment costs are higher;
- Competing micromobility solutions, such as e-scooters and shared bikes, represent another challenge to the profitability of car-sharing services. Renting a Smart in Frankfurt or an e-scooter costs approximately the same: around €0.20 per minute;
- Car sharing is challenged in two more important use cases: safety regarding transport of (small) children and in terms of cost when running multi-stop trips; and
- Bigger cities have no particular interest in offering preferential conditions for car sharing as they learn that this service does not help manage city car parking.