The Future Of Carsharing Is Here

Carsharing is a straightforward concept; the term is exactly what it means. Carsharing is a low-cost, short-term car rental option with an hourly rate for use of a car. This service is an ideal option for those who regularly use alternative transportation, those who want to avoid wear and tear on their vehicle or even those who don’t have cars.

Carsharing is somewhat a new phenomenon in Malaysia, but it is no doubt gaining popularity among millennials since many of them cannot afford to own a car because of the rising cost of living, or who are too environmentally conscious to do so. Carsharing is the most ideal choice for those who want the freedom of driving without the burden of a car loan. However, for those who choose to own their own car, this service could also help them with the loan.

In China, now the world’s second largest economy, rising incomes and a booming domestic car industry have flooded Chinese roads with automobiles, contributing to severe air-pollution problems, world-class traffic jams, a city-destroying parking crisis and the loss of liveable, pedestrian-friendly neighbourhoods.

Enter carsharing services in China. It is estimated that carsharing services are looking to hire out as many as 2 million vehicles by 2020, a massive rise from about 100,000 in 2017. There’s a growing case to be made that car-sharing represents the future of transport in China, and China could determine the future of carsharing.

Image from: Sustainable Transport in China

There are 3 main factors which have contributed to the rise of carsharing services. One, Chinese consumers are increasingly willing to forgo car ownership due to the high car prices and choked traffic. Secondly, carsharing services are easy to use, with apps no more difficult to navigate than Uber. And thirdly and most importantly, carsharing businesses are exclusively using electric vehicles, which are heavily subsidized by the Chinese government. This makes it possible for the companies to deploy larger fleets of cars at a lower operating cost.

Tesla founder Elon Musk has the same thought for the Chinese market. He’s no longer thinking about how many Tesla models he will be seling, rather, he’s looking towards how many Teslas he can use for carsharing. Musk wrote that once regulators approved self-driving cars, owners would only need to “tap a button on the Tesla phone app” to send their cars off to generate income “potentially exceeding the monthly loan or lease cost”. He estimated the feature could arrive as early as the end of 2019. Tesla also intends to operate its own network of driverless cars, taking a cut of each ride that could be as high as 30 per cent, in line with current ride-sharing practices.

That could help reduce the pressure Tesla feels to sell its cars. Instead, the company will only need to deploy them to generate revenue. Musk has also said that the plan is to have a company-owned fleet operating in places where there simply aren’t enough customer cars to be rented out.

This is big for carsharing services as a whole, because automotive manufacturers are now scrambling to develop services for the Chinese car owners to rent out their vehicles when it’s not being driven.

“We’re approaching a point that could flip the entire car market on its head,” said Shwetha Surender, a London-based analyst with consultancy Frost & Sullivan. “Carmakers risk becoming mere suppliers to shared mobility services and losing direct relations with customers. That’s an unattractive proposition.”

Didi Chuxing, China’s largest ride-hailing company, formed an alliance of global auto companies to design and build electric vehicles designed for car-sharing. Among the members are Volkswagen and Toyota. Meanwhile, Lynk, a joint venture between Volvo Cars and Geely Automobile, recently launched a car-sharing feature in its new models. An owner simply notifies a dedicated network that the car is available for rent, and anyone with a Lynk smartphone app can then rent, open and start it up. Daimler and BMW AG merged their car-sharing ventures to gain greater scale. Volkswagen AG is testing its MOIA ride-sharing service in Hamburg, while General Motors Co. has invested in Lyft Inc.

Moscow is another example of the carsharing boom has taken over and it shows how quickly consumers can abandon the traditional car.

Yandex.drive, a venture set up by a local Russian Internet company, flooded Moscow with more than 7,000 cars to rent for as little as 5 rubles (RM0.31) per minute, including fuel, maintenance and parking. Almost out of nowhere, carsharing in Moscow boomed, with the number of vehicles more than tripling compared to 2017.

Because of this boom, Moscow now has the biggest carsharing fleet in Europe and the second largest in the world. The rapid shift spells trouble for automakers by providing a blueprint for how a deep-pocketed technology player can move quickly to woo consumers with alternatives to traditional car ownership.

Jürgen Berg, in charge of the Flex project powered by CFL Mobility, believed that carsharing should be fun, and that there are plenty of ways to think more holistically about it.

“Carsharing should not be seen as a must. People should be having fun sharing cars and using public transport. At least it should be a positive thing. If not, something is wrong,” Berg says.

One of the ideas that he put out is the “combo of carsharing and free parking. In cities you have to pay for parking on the street per hour, not necessarily for making money, but because there is limited space. With carsharing you pay per hour.” The logic is that since drivers are already paying per hour, it’s in their best interest to return their car as soon as possible, negating the need to charge for parking simply to encourage drivers to free up those parking spaces.

Carsharing looks like it’s here to stay. And the future of car purchase seems to be up in the air. What do you think?

Fun With Automotive, The IndustryJoel WongMarch 25, 2019Fun With Automotive