The car sharing market, although still relatively small, has grown by 30% annually worldwide, and manufacturers and rental companies have been encouraged to invest significantly in the new industry. Saad Ahmed and Sotiris Kanaris investigate the developments and implications
In recent years, some sectors of the economy and society have begun to shift away from the traditional single-ownership model. What is known as the ‘sharing economy’ has gained ground, fuelled by app-based technology, and collaborative consumption may challenge the notion of traditional company fleets.
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The advent of car sharing services in the urban environment shows that this model is poised to alter the landscape, with significant implications for lessors.
Car sharing services operate in two main ways, targeting either individual or corporate users. Within the individual model, there is a division between peer-to-peer (P2P) services, and business-to-consumer (B2C) models. In all cases, the drive towards shared car services has been prompted by new realities in demand.
The boom in car sharing has resulted from corporates seeking to offer more flexible options to employees and lower expenditure at the same time, and local authorities and governments seeking to advance environmental and traffic-management policy agendas.
Changing corporate client needs
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By GlobalDataCorporate car sharing clients seek lower costs and greater flexibility, and these aims often align with those of their employees.
The conventional company car may not be suitable for all companies and employees who require occasional mobility.
“We thought that a company car is a nice perk, but as a mobility solution it does not respond to the needs and requirements of all employees,” says Rob Custers, fleet manager at Siemens Belgium.
In 2012, Siemens Belgium began to offer a range of transport services for its employees, which included public transport, short-term vehicles, and car sharing.
Partnering with Ubeeqo, the company implemented a fully automated process with a cloud-based reservation service. Cars can be unlocked and entered with the employee badge.
Custers says a major reason for the implementation of car sharing was to meet the individual needs of employees in a better way. “Once in a while, an employee may need a car to go to an event or training,” he says. “On that occasion, the employee can book a car in advance from the car sharing platform. We acknowledged that for each employee there needs to be a customised solution and this can change throughout their career.”
Car sharing services have proven significantly more cost-effective than other staff mobility options.
In the case of Croydon Council, a south London local authority which partnered with Zipcar, employee business miles per year fell 42%, and travel costs by £500,000.
The services also reduce costs through better utilisation of fleets. This allows for more efficient use of fewer cars, which could result in the same number of employees being served at much lower operating costs.
“It’s logical, especially if we know a car is standing still on the parking lot more than actually being driven,” Custers continues, explaining that the fixed costs of owning a large fleet of company cars stay the same, regardless of how frequently they are used.
“By allowing more drivers to use the same vehicle and thanks to the advanced reservation and booking tool, we can optimise the operational usage of each car.”
The evolving demographic make-up of the work environment may be another factor driving car sharing.
Generation Y or the millennials, widely considered to be those born between 1980 and 2000, became the largest group in the US workplace in 2015, according to Pew Research Centre.
This age group is projected to form 50% of the global workforce by 2020, according to PwC.
Younger adults seem to be shifting away from car ownership, for a variety of reasons.
“The average buying age of a car owner is moving towards the mid-thirties and early forties,” says Shwetha Surender, senior consultant at Frost & Sullivan.
“Generation Y feels less attached to ownership, and are more into usership,” adds Jaime Requeijo, senior vice-president of business development at LeasePlan International. “Companies also see an opportunity to address them with an offer that suits their needs.”
Car sharing options in corporate environments will seek to mirror this trend among individuals. As individual buyers move away from car ownership in their private lives, corporates can shift away from the traditional company car structure.
The rise of car sharing in the corporate space has resulted from this melding of interests. The growing acceptability of car sharing in the public sphere and an increasing preference for usership among a younger demographic have provided the opportunity. Corporates can cut costs and increase efficiency while meeting employees’ individual travel needs in line with their own preferences.
“We’re seeing a change in attitude. A few years ago car sharing was considered a nice businesses model, but slowly it’s being integrated into the more mainstream mobility landscape,” says Surender.
The role of government
The rise of car sharing services would not be possible without the cooperation, and in some cases direct involvement, of local and national governments.
The example of Croydon Council shows how government agencies can act as corporate clients. In most cases, however, local authorities and governments become involved in car sharing as facilitators.
“The schemes rely on getting specific car permits for parking or charging stations,” says Requeijo.
The changing attitudes of local authorities towards car sharing services are allowing the sector to advance. Local authorities encourage and support the expansion of car sharing services in two ways. In the more practical case, local and regional governments partner with car sharing companies to promote their services.
The Essex Car Share Scheme follows the P2P model of car sharing, and was established by Essex County Council and Liftshare to encourage local government employees to share lifts.
Governments seek a reduction in pollution, better utilisation of dwindling space in urban environments, and an answer to road use and congestion concerns. Car sharing provides ways for these policy agendas to be implemented.
In London, the city government formed the Car Club Coalition in 2014, bringing together a consortium of public transport providers, car sharing operators and traditional car rental firms in a bid to expand car sharing to one million members by the year 2025.
“They are quite aggressive about their plans for the city,” says Surender. “There are a number of reasons why they are making this shift. Certainly air quality is influencing them, but also a different perspective that they are taking towards allocation.”
As detailed in the 2015 Transport for London (TfL) report A Car Club Strategy for London, there is a concerted effort to reduce dramatically the number of cars on the road and parked on London’s streets.
“The overarching vision for this strategy is for car clubs to grow as a means of reducing car ownership, to help address population growth, congestion and environmental issues,” the report reads.
The environmental benefits of car sharing are the main reason for rising government support. As a corporate client of Zipcar, Croydon Council saw employee CO2 emissions fall by over 100 tonnes. Governments may seek to promote this to the wider population to drive falls in pollution on a much larger scale.
Road and land use
Efficient allocation of both road and land use is another major driving philosophy behind car sharing.
The TfL report found that the average driver in London uses their car for only 4.6 hours a week, leaving the vehicles idle 97% of the time.
Zipcar claims that one Zipcar takes 17 privately owned vehicles off the road, thereby reducing congestion.
In many cases, problems of allocation sit side by side with environmental concerns. The TfL report shows the desire of London’s government to repurpose parking spaces to environmentally friendly ends.
Proposed uses include parking spaces for bicycles, areas for outdoor physical activity, and charging points for electric vehicles.
Governments and authorities cooperate with car sharing companies to pursue policy with regard to the environment, public health, and the utilisation of public space.
A receptive government is therefore crucial for the continued growth of car sharing.
Implications for lessors
Though car sharing is still a relatively small market, with annual rises of 30% it is already beginning to impact lessors.
Much lower operating costs are a draw for companies to seek out car sharing as an alternative to buying large fleets of company cars that are not required around the clock.
Many fleet lessors have joined this burgeoning industry, seeing the benefits that car sharing may bring Car-sharing service SwopCar is a division of LeasePlan International. It operates in 12 countries, and anticipates spreading to a further eight within the next year.
“It is a corporate car sharing scheme…addressing the concerns of corporates,” says Requeijo at LeasePlan International.
Lessors will need to adapt their services to the new market realities, and by doing so they may expand their corporate client base.
“We’re expanding the pipe of the potential users of corporate cars,” Requeijo continues. “There’s a big population still [among] our clients that need mobility, but only on a part-time basis.
“If we can provide a solution for those then we will be expanding our opportunities to actually sell services to those companies.”
Fleet lessors see the need to enter the market relatively early, changing the way they do business so as not to be adversely affected in future.
Though this may produce short-term losses in volume, gaining a foothold in the new market and spreading smaller services to a greater number of companies, may lower future financial losses due to competition.
“Imagine that we are supplying cars for 200 sales people. Now, instead of 200 cars, [we supply] 20 cars. That seems counter-intuitive,” says Requeijo.
“We believe that it offers more opportunities for a lessor to sell their services.”
The future
Car sharing is rising by 30% annually, fuelled by growing popularity among corporate users.
“By 2025, potentially between £6bn and £9bn could be car sharing earnings,” says Surender.
Larger corporate clients may downsize company car fleets to better utilise a smaller stock through car sharing. The other side of the car sharing increase is that smaller companies which were unwilling to shoulder the expense of a standing fleet of company cars may sign up to corporate car sharing schemes, providing an opportunity for an expansion of clients.
Lessors must be flexible in their approach, and shift to fit the changing needs of corporates, or risk losing significant business as car sharing continues to grow in popularity. <
