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The Triple Bottom Line of Car Sharing

Tatiana Brunvall

Of late, the zeitgeist of Gen Y has shifted away from traditional American consumerism towards the collective mentality of adopting a “sharing economy.” Defined as a socioeconomic structure rooted in peer-to-peer sharing of assets and goods, collective consumption has become ubiquitous in many cities across the United States. Research has revealed that “more than 200 start-ups, backed by a total of $2 billion in funding, are now involved in the renting, reselling, giving or swapping of goods and services.”[1] This being said, the trend is perhaps most prevalent in car sharing, a phenomenon said to reduce traffic congestion, air pollution, and parking scarcity in major cities.

So what exactly is car sharing, and what makes it so popular? The traditional model (embraced by Avis, Hertz, ZipCar, etc.) offers a company-owned fleet of vehicles available for short or long-term rental. However, a plethora of new companies have recently emerged, enabling individual car owners to rent out their unused vehicles to other platform users within close proximity. In the last 12 months alone, Cleantech Group’s i3 Platform has tracked $204 million venture equity investments being funneled into car sharing firms such as City CarShare, RelayRides, GetAround, Drivy etc. Not to be confused with ride sharing, payment for car sharing is typically made based on rental time or distance traveled with the vehicle.

As for this new model’s popularity, the justification is threefold and requires some consideration of recent socioeconomic and technological developments. According to Steve Webb of San Francisco-based RelayRides, the primary demographic using the firm’s proprietary car sharing platform is a group of young, well-educated individuals in major cities. For those with access to public transportation, a simple cost-benefit analysis for infrequent car users shows that renting is often significantly cheaper than ownership. Furthermore, there is no large upfront cost or down payment required, making car sharing an attractive option for those with less economic legroom (pardon the pun). Secondly, the sharing economy has been facilitated by the rise of smart phone apps, making it possible to borrow or rent goods with the click of a button. Millennials have embraced the efficiency of automated vetting of users and deals made in real time, further accelerating the popularity of car sharing. Lastly, the element of increased environmental consciousness seems to be a driving force behind the trend, as illustrated by the prevalence of electric, hybrid, and biodiesel cars on car sharing platforms. Webb further points to studies conducted at the University of California – Berkeley, which suggest that a single shared car may displace up to 15 private vehicles. In other words, sharing your car could take another 15 off the road – a lucrative prospect for those with vested interests in their city’s air quality.

The environmental benefits of the trend are clear; the prospect of cashing in on unused vehicles on the supply side, or the demand-side cost of renting a car, encourages car sharers to optimize vehicle usage and opt for public transportation when possible. From a business perspective, companies such as RelayRides take a 25% commission off of deals – a business model which in June landed the firm a further $25 million in Series B funding. And with local government incentives such as San Francisco’s recent provision of 900 parking lots designated specifically for car shares, it is evident that even the authorities are recognizing the benefits of the trend.[2] As such, car sharing is perhaps the epitome of a business model adhering to an economic, social, and environmental triple bottom line.

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[1] http://www.bloomberg.com/news/2013-12-30/your-idle-lexus-for-rent-seen-as-productivity-revival-economy
[2] http://www.sfgate.com/bayarea/article/Car-sharing-firms-getting-900-S-F-street-parking-5387271.php

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