Will car-sharing schemes ever become mainstream?

The level of interest in different forms of shared use mobility schemes seems to have died down relative to the peak of a few years ago, if you measure that in terms of news headlines and launch announcements.  That may not be the best metric, but it does seem that the bubble has burst, and that it no longer excites investors in the way that it did at one point when manufacturers had to demonstrate to their investors that they were active in this area, and money was being attracted into start-ups and IPOs as if personal mobility was going to pivot towards shared use in the coming years. 

I never bought into that hype, even though I have been following the development of the sector for almost twenty years now, since Zipcar and Flexcar were founded in the US, and I have been an occasional user of car-sharing services since they came to the UK.  The fundamental issue is that for most people, car sharing is something they will use when it suits them, rather than as a replacement for their own sole use car.  The most recent ICDP consumer research across six European markets, showed that 90% of current car owners still believe that they will have exclusive use of a car in ten years’ time.  They value the fact that they can leave their stuff in it, personalise it, and always have it available on demand outside their home or workplace.  Our slightly older but broader research covering over 6,000 adults in EU4 shows that consumers are largely unaware of the range of car mobility options, even in cities where car club cars are parked in prominent locations.  When the options were explained to them, interest remained at not more than 35%, and with a high expectation of the service level provided, particularly around peak-time availability and the option to pick up and drop off in different locations. 

These factors together make the business case for car sharing extremely challenging where trips are charged by the minute or kilometre.  The size of the fleet needs to be sized to meet peak capacity with low utilisation at other times, and cars will tend to flow between locations in line with typical commuting patterns, meaning that availability at some locations will reflect over or under supply depending on the time of day.  The real-world experience of operators is that there are only a few specific locations where there is the potential to mix in business of different types at different points in the week, so these can fit together like a jigsaw to give some overall balance and efficiency.  Other locations which are reliant on only business or private use biased to particular times and days will be structurally unprofitable at the rates people are prepared to pay. 

Despite this, in recent days, I have had conversations with some different players who are already active in this space, or are looking to enter it in the near term.  What are the factors that might influence their success in a space that does not appear to have offered good returns in the past?  In each case, their strategy appears to be based on remaining flexible on how cars are used.  Their mobility offers are not based solely on car sharing from fixed locations, but also include offers closer to daily rental and using the mobility fleet to meet dealer needs for courtesy cars.  They also have the advantage that they can use the mobility fleet as a ‘safety valve’ to absorb any excess supply in a more cost effective and flexible way than classic daily rental channels or self-registrations for immediate sale as zero-kilometre cars.  Together, these broaden both the demand patterns and reduce the effective fixed cost of the fleet. 

That may address some of the challenges on the supply side, but will the customers then turn up in volumes that take car sharing into the mainstream, replacing some cars that may have been sold, leased or provided on subscription for dedicated use?  If the convenience factors are addressed on the supply side, the key factor on the demand side that will need to be addressed relates to the perception that car sharing is more expensive than ownership on anything other than an occasional basis.  The problem here is not related to car sharing costs, but a very poor understanding by car owners of how much it costs to have the convenience of a dedicated car.   Most owners underestimate the total cost of ownership by a massive amount – a 50% error is not unusual. 

As this might reflect a preference not to recognise the true cost, it may be driven by emotional rather than rational factors. Regardless of whether the car is a family hatchback or something more exotic, ‘having your own car’ remains important to many people. I therefore suspect that car sharing will have to wait some significant time before it becomes mainstream, so that it disrupts the new car market, meaning that leasing (including long term subscriptions) will remain the most prevalent form of mobility.