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Car sharing – an opportunity for Auto OEMs in a tattered market?

Stephen Marcus

The dire financial situation of the auto industry is already well chronicled. Global car sales have fallen 6.3% from their peak of 71.4 million in 2007 down to 66.9 million in 2010, a rate of decline not seen for decades. Digging deeper into these numbers reveals a more dramatic story: sales have plummeted in America almost 40% below their highest point to levels last seen in the early 1970s, necessitating bastions of the American auto industry such as GM and Chrysler to have their balance sheets shored up by large government handouts.

Global Car Sales

Source: www.economist.com

In tandem with the recession-induced dearth of car sales, the total cost of car ownership is showing the opposite trend. According to the 2011 AAA ‘Your Driving Costs’ study, the cost of operating a sedan in the U.S. increased by 3.4% to $8,776 per year based upon 15,000 miles of annual driving. One of the biggest culprits was gas prices which, despite increases in fuel economy, had increased 8.6% to 12.34 cents per mile on average for sedans.

So far, so simple.

But adding further fuel to the fire is car sharing. The results from a North American shared-use vehicle survey by Elliot Marin et al. showed that at least 23% of car sharing members actively decided to join a car sharing company instead of purchase a car.

With Zipcar’s current membership base standing at 560,000, that represents at least 128,000 in forgone car sales in the U.S! Whilst still representing a small percentage of total sales, if Zipcar achieves its ultimate aim of having “more car sharers than car owners in major urban cities”, it would more than ruffle a few of the OEM’s feathers.

However, contrary to the global recession and upward trending oil prices, car sharing is something that could provide auto OEMs with a new revenue stream rather than just present sales challenges. To this end some auto OEMs have jumped on the car sharing wagon.

For example, Daimler’s Car2Go that began in October 2008 is now available in Ulm, Hamburg and Austin. In 2010, Peugeot launched Mu by Peugeot which allows customers to access a range of Peugeot cars, vans, scooters, and bicycles via a pre-paid credit card. Most recently in March 2011, BMW launched a premium car-sharing service in Germany called DriveNow along with its joint venture partner Sixt AG. The interesting element about BMW’s service is that cars aren’t located in fixed pods throughout the city and can instead be picked up and dropped off anywhere in the city.

(The Economist cleverly refers to these corporations that combine their scale with agility in the face of fast-changing market dynamics, as Multinationimbles)

I believe that this emerging “multinationimble” trend will continue and it will become more crucial for automobile manufacturers to find new ways to relate and sell to their customers if they are to weather the storm ahead. No one can deny that the traditional “manufacture, sell, and collect money” business model has taken a hit for big-ticket items like cars. Therefore providing more flexible mobility services that require minimal upfront costs are likely to be a good bet.

Any thoughts? Weigh in below

Stephen Marcus is the green transportation analyst at Cleantech Group. You can follow him on Twitter at @stephenmarcus.

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