What’s Ahead for Car Sharing?

What’s Ahead for Car Sharing?

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What’s Ahead for Car Sharing?

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  • When Car Sharing Makes Sense

    What specifically will induce drivers to forgo private ownership? First, car-sharing services will have to offer value by providing vehicles that meet users’ needs at a fair price. Second, they must ensure extensive coverage; cars will have to be readily available when users want them, and the rental process must be easy to negotiate. Finally, users will have to trust the ability of car-sharing services to provide reliable vehicles, deliver on their promises, and resolve disputes fairly. Under these conditions—and assuming rational consumer behavior—some (but by no means all, or even most) owners of private vehicles could be convinced to make the switch.

    Value. In general, car sharing enjoys the largest cost advantage in the case of drivers who accumulate low annual mileage. Car ownership entails several fixed costs, including depreciation, insurance, and maintenance, which add significantly to the total cost of ownership. Car-sharing users pay only when they use a vehicle (usually a time-based rather than distance-based fee), though they pay more per trip than they would to use their own car.

    In Europe, city-car drivers who drive less than 7,500 kilometers a year would pay less to share than to own, as would drivers of compact cars who drive less than 12,500 kilometers a year. Drivers of midsize cars would have to drive less than 16,000 kilometers a year to gain an advantage from sharing, and drivers of large cars would have to drive less than 24,500 kilometers a year. (See Exhibit 2.) Overall, 17% of city-car drivers, 46% of compact drivers, and the majority of midsize and large-car drivers would incur a lower total cost of ownership with car sharing, based on their annual mileage. (See Exhibit 3.)


    Car sharing will also have to fulfill individual consumer needs if it is to replace car ownership. In all regions, the largest pool of potential customers is owners of compact and city cars. These consumers represent the typical target group for car sharing, mostly for short trips within a limited radius. Yet not all of these people will actually forgo car ownership. Many will still prefer the certainty of having a car at their disposal whenever they need it, while others will continue to opt for private ownership because they need to drive unusual routes, because they desire a certain model with a specific interior configuration, or simply because they prefer not to use shared cars.

    Our baseline evolution scenario suggests that car sharing will best meet the needs of some 40% of city-car drivers and 20% of compact-car drivers in Europe, given their usage and driving patterns. We expect these shares to be somewhat lower in the US and in Asia-Pacific. Drivers of large and midsize cars tend to drive longer distances more frequently and to carry larger payloads and regard their vehicles as signifiers of status and achievement. Neither of these groups of drivers is therefore likely to forgo car ownership.

    Coverage. Car-sharing services require a critical population mass in order to be profitable. We have found that in Europe and North America, that means a population of at least 500,000. Car sharing in most countries in those regions will therefore be economically viable only in the capital city, or possibly in the three largest cities. In Asia-Pacific, by contrast, where per capita incomes are generally lower and the transportation infrastructure is less developed, car sharing will be economically viable in cities with populations of 5 million or more. Asia-Pacific will nonetheless be the largest market in absolute terms, because of its very large and growing population.

    Trust. When a service is offered by a recognized and respected brand, such as an automotive OEM, trust is naturally established by the provider’s reputation. But start-ups and P2P services will have to establish trust by other means, such as peer-to-peer reviews, service guarantees, and consumer review services.