Car sharing and the impact on the automotive industry

The news a few weeks back that William Helman IV, a partner at VC firm Greylock Partners and the lead director on Zipcar’s board, had become the 15th member of Ford’s board came and went. Most of the stories about the move looked like rewritten press releases with the same quote that Ford’s executive chairman, Bill Ford, issued via a statement.

But the relationship between car sharing companies and automotive manufacturers bears scrutiny. Studies are emerging and show, not shockingly, that car sharing programs reduce vehicle ownership. Which raises the basic question, Does car sharing present a long-term problem to the automotive industry by showing consumers that renting a car on demand, whenever they need it, is a better experience than car ownership?

The current answer is no, which may be part of the reason the industry isn’t fighting car sharing the way the hotel lobby is fighting vacation sharing company Airbnb. If anything, the automotive industry is moving quickly to compete in the car sharing market, viewing the space as a strategic investment. Daimler has rolled out its own car sharing company, Car2Go, in Austin and Vancouver; BMW announced DriveNow in March; and Volkswagen trials Quicar in Hanover, Germany, this fall.

Car2Go will launch the first all-electric vehicle car sharing fleet in San Diego later this year, in a partnership with San Diego Gas and Electric and ECOtality. Car2Go CEO Nicholas Cole and I recently discussed Daimler’s logic in jumping into the car sharing business. “In city centers people aren’t going to have two or three cars in the future. I think all the manufacturers are looking out at the horizon at what’s next and logical,” he said. “The fact that we manufacture the vehicle would be an advantage. It’s our product, we’re getting people exposed to Daimler products.”

The desire to expose drivers and potential future customers to its products is motivating Ford’s partnership with Zipcar, particularly given that Ford is getting 1,000 Ford Focuses onto 250 college campuses as part of Zipcar’s college car sharing push. Ford is reaching a young demographic that is not yet brand-loyal and for which vehicle ownership or renting a car is not usually an option.

The emerging alternative to a centralized ownership model of car sharing is peer-to-peer car sharing. Startups RelayRides and Getaround, which have raised $5 million and $3.4 million, respectively, in the past six months, allow car owners to rent their cars to other drivers in their local community.

Comparing peer-to-peer car sharing to Zipcar, which has to maintain a car fleet, RelayRides founder Shelby Clark noted, “It’s more scalable, it’s more capital efficient, it’s better for the environment because you’re not creating new cars, you’re using ones on the road.”

And maybe that’s where the rub is for automobile manufacturers. If the share economy is built around greater utilization of goods, the greatest efficiency lies in sharing what’s already out there. While automakers can view Zipcar the way they view the rental car companies — as another large organization whose car fleet they can outfit — it’s tougher to argue that facilitating drivers borrowing their neighbors’ cars has much to do with selling new cars.

Rather than fight, the automakers are accepting that car sharing is part of a larger cultural shift in which consumers are less enamored with ownership and more enamored with services. And if car sharing truly becomes a widespread cultural phenomenon, the automotive companies best positioned in terms of car sharing will exert greater influence over what model of car consumers drive. Automakers may find themselves selling volume to car sharing companies, and the automotive manufacturers with the best relationships with car sharing companies will come out on top. Which would explain why, if you’re a car company, you might want a representative or two from a car sharing company on your board.

Question of the week

How will car sharing affect the automakers?
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Adam Lesser

Cleantech Curator Gigaom Research

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