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Cars of the Future

Sharing, a Global Trend


Sharing, a Global Trend


As carsharing services thrive in urban areas of the United States and Europe, major carmakers are scrambling to cash in on the new mobility services trend.



Sharing, a Global Trend

By Shu-ren Koo
From CommonWealth Magazine (vol. 574 )

In recent years, the streets in German cities have begun look somewhat different. A growing number of cars parked at the curb or in above-ground parking lots carry the conspicuous logos of carsharing companies such as Car2Go, DriveNow, QuiCar and Fordcarsharing. The fleets feature gasoline and electrical vehicles of major international car brands such as BMW, MiniCooper, Smart, Ford and Volkswagen.

Now and then the passerby can witness someone holding his or her mobile phone or a smart card against a sensor in the windshield, registering it with a beep. Then the car door opens, the user gets in the vehicle and drives away.

Or you see someone park a car at the street side, hook it up to an electric charging station before "returning" the vehicle with another confirming "beep" from the windshield sensor.

This is the new reality of carsharing, a rapidly growing sector in major cities in Europe and the United States. Comparable to Taiwan's public bike rental system YouBike, registered users can rent vehicles anytime and anywhere for one-way trips.

This paradigm shift among the younger generation to using instead of buying not only radically changes our way of using cars, it also heralds the beginning of the sharing economy.

Faced with this growing number of young people who are increasingly less inclined to buy their own cars, the major carmakers have begun to develop their own carsharing ventures to cash in on the thriving mobility services sector on top of their traditional business - car manufacturing and auto sales.

Attracting Share Communities

Klaus (not his real name), a 30-year-old German who works for a carmaker, lives near the central railway station in Munich. Within ten minutes' walking distance from his home, Klaus has the choice of four or five carsharing stations.

More than a year ago, Klaus, who usually takes the subway or the S-Bahn commuter railway, began to use a carsharing vehicle to go to work during the week, do his weekly shopping at the hypermart, or go on outings with a few friends on the weekend.

"This gives me a lot of flexibility timewise, and it is also very convenient," remarks Klaus. "It's not much more expensive than the subway or commuter train and cheaper than a taxi."

 Klaus notes that a shared car costs him just NT$10 per minute. A whole hour sets him back around NT$400. "Maintaining a car in Europe is just too expensive if you add together the expenses for gasoline, taxes, insurance and maintenance. There are different models of cars available for use at a cheap price…why shouldn't I use them?" Klaus asks.

Although Klaus works for a carmaker, he will likely not buy a car, even after getting married and having kids, because he feels carsharing is so much more convenient.

In a bid to reach young consumers like Klaus who are not willing to buy a car but still need one once in a while, carmakers have begun to either cooperate with car leasing companies or develop their own mobility services in recent years.

"We saw the trend coming, so we needed to respond to it," notes Tanja Neuderth, project leader on carsharing at Ford Germany. In 2013, Ford Germany joined hands with its dealers to launch the Fordcarsharing service.

Daimler AG, the parent company of premium car brand Mercedes-Benz, established Car2Go already in 2008, and it has since become the carsharing service with the highest number of users worldwide. As of end of 2014, Car2Go had 1 million members and a fleet of 11,000 vehicles in 29 cities in Europe and the United States.

"Virtually every other second someone uses a Car2Go vehicle," says Eckart Mayer, President and CEO at Mercedes-Benz Taiwan.

The global No. 2 is ZipCar of the United States. Other major carmakers including BMW and Volkswagen from Germany, France's Citroen, General Motors in the United States and Japanese car-leasing firm Orix have created their own carsharing services.

Even China has joined the carsharing trend. Daimler AG announced in January that its Car2Go carsharing firm will begin to offer its services on a trial basis in selected locations in Chongqing within a year. Users can use the Alibaba Group's third party payment platform AliPay or Tencent's WeChat mobile payment service to pay for the carsharing service, which will be the first non-station-based system in China.

Local car rental firms such as China Car Clubs in Hangzhou and EduoAuto Beijing have already developed their own station-based car sharing networks covering twelve major cities including Beijing, Shanghai, Guangzhou and Shenzhen. The Geely Holding Group has launched the Wei Gong Jiao carsharing scheme in a joint venture with electric vehicle maker Kandi Electric Vehicles.

In Taiwan, the Hotai Leasing Corporation under the Hotai Motor Group launched the island's first carsharing service iRent with 70 vehicles at 20 stations in seven cities in June of 2014.

Users only need to download an app and register as members with their stored value EasyCard or credit card to be able to use the carsharing service for an hourly fee of NT$168.

Since its inception a year ago, iRent has attracted 7,000 members. In Taipei, membership is increasing by more than 300 people per month.

"This is faster than we expected, but we hope it will become even faster," notes Stanley Lo, General Manager at Hotai Leasing's Planning and Administration Department.

Among iRent members, people in the 25-34 age group account for 54 percent of all customers.

Smartphones Bring Carsharing Breakthrough

The first carsharing schemes actually arrived some 15 years ago. However, the sector has only seen explosive growth in recent years after smartphones became common and greater Internet bandwidth and speeds became available. 

As of the end of 2014, more than 1 million people were registered members of carsharing schemes in Germany. This amounts to an increase of 37 percent over the previous year, according to statistics by the Federal Carsharing Association.

Nationwide, 150 enterprises provide carsharing services in 490 towns and cities. The number of carsharing stations increased from 3,900 to 4,600 in 2014, an 18-percent increase over the previous year.

Changing behavior and thinking among younger consumers is also a key factor driving the industry.

Weert Canzler, who researches carsharing at the Berlin-based Innovation Center for Mobility and Societal Change (InnoZ), observes the following generational differences among consumers: For the post-war generations, owning a car was a symbol of wealth and status that generated a sense of achievement. However, for young people who were born in the Internet age, cars are just one kind of commodity.

"Because there are more choices, buying a car has been replaced by other things," Canzler points out. "Young people today probably covet an iPhone or iPad more."

Research by the AAA Foundation for Traffic Safety in the United States shows that the number of cars bought by people in the 18-34 age group has declined 30 percent over the past five years.

Although consumer attitudes toward owning a car are rapidly changing, establishing systems that allow users to pick up and return a car anywhere and anytime they like is not a simple undertaking. Unless industry and government work closely together, such schemes are not likely to see huge success.

Cooperation Needed

In the case of iRent, Chunghwa Telecom provides car phones that are able to identify users and locate cars through GPS. The company also developed the iRent smartphone app. Hotai Leasing cooperates with parking lot operators to rent parking spaces.

Hotai Leasing's Lo notes that presently iRent vehicles need to be returned at the same station where they were picked up because it is not yet possible to get all parking lot operators integrated within the system. Unfortunately, this greatly impacts user flexibility.

Another problem is that the majority of parking lots in Taiwanese cities are underground or in indoor parking garages where wireless Internet and GPS signals are not necessarily strong enough, so that users may not be able to unlock a car. Therefore, iRent stations are all located at outdoor parking lots.

"The key to the popularization of carsharing is integration among different providers, institutions and the government as well as information sharing," remarks Canzler.

Government support is an important pillar for the popularization of carsharing.

Thanks to strong government support, carsharing firms in Germany can use public parking lots or park their cars at the curb.

The German government also offers incentives for developers to reserve several parking spaces for carsharing vehicles when building new projects. As a result, Germany has the highest density of carsharing services in the world.

Under Taiwanese laws and regulations, private enterprises are not allowed to rent parking spaces in public parking lots or on the side of the street.

"Protecting the environment is a very important issue in Europe. As long as it can reduce greenhouse gas emissions, it will get political support," says Neuderth.

Another benefit of carsharing is that such services allow carmakers to develop new sources of income from customers that were previously not even on their radar. This also leads to the emergence of new business models.

Neuderth met with considerable resistance when she began to promote the carsharing business at Ford Germany. The car dealers felt this new business would not only require additional investment but also eat into car sales. They feared that they would soon be out of business if everyone used carsharing instead of buying a car.

Later the Ford dealers discovered a rather unexpected effect. People who weren't Ford customers in the first place or people who weren't planning to buy a car at all decided to purchase Ford vehicles after using the company's carsharing services for a while.

The carmaker also found out that the more people use carsharing, the more valuable information can be gathered on user habits. The better Ford understands its customers, the better new car models and services can be tailored to their needs.

But Neuderth also frankly admits that no one can predict what the outcome will be when carsharing and other novel urban mobility schemes continue to develop further.

"For us this is a continuing process of learning and exploring," Neuderth points out.

Translated from the Chinese by Susanne Ganz