Is the car sharing industry finally ready to move up a gear?
The booming sharing economy is shaking up industries from music to office space. But there’s one key part of our lives that has remained relatively undisrupted. While websites such as Airbnb have enabled home owners to offer their properties up to a global audience of potential holidaymakers, and streaming services such as Spotify have largely confined trips to music shops to the history books, car-sharing remains pretty embryonic compared with the major players in rival industries.
The idea isn’t a new one, but there have been some false starts and only in more recent years has there been interest from businesses with deep pockets.
WhipCar, founded in 2009, described itself as the world’s first peer-to-peer car rental service, but went out of business four years later. Streetcar, which owned its own fleet of cars, started up way back in 2004 and was bought by Zipcar in 2011, which in turn was snapped up by rental giant Avis in 2013.
Only a few major rivals exist in the UK, such as easyCar, HiyaCar and DriveNow (launched by BMW and Sixt), but there are some burgeoning European and American players with increasingly bigger backers.
This means the prevalence of car-sharing could be about to start accelerating.
Car ownership is likely to become more expensive as authorities seek to find ways to make their busiest cities less congested via punitive taxation on private owners and, as technological advancements make cars pricier, manufacturers might benefit if they can sell models to big sharing schemes.
According to the research firm Frost & Sullivan, the number of members using car-sharing services is expected to increase almost threefold from roughly 6m in 2017 to almost 18m by 2025, with the US expected to have the lion’s share of these at 10m.
Niranjan Thiyagarajan, senior consultant at Monitor Deloitte, said the rise of car-sharing would be driven by urbanisation and the increasing cost of transportation.
“Congested cities, with increased traffic and pollution, penalise car ownership while customers are encouraged to use public transport,” he says. “Car-sharing sits in a niche between the two and is able to offer the comforts of private transport with the flexibility and economies of scale, driven by a sharing model.”
Accounting and consultancy behemoth EY announced in August the launch of its Tesseract platform, which is aimed at promoting various methods of sharing vehicles.
At present the only two models that exist are peer-to-peer, whereby people rent an individual’s car via a website, such as easyCar, or renting cars owned by hire companies for an hourly rate, such as Zipcar.
John Simlett, global leader for the future of mobility at EY, says Tesseract would allow what he termed “fractional ownership”, allowing single vehicles or fleets to be put on a digital platform by a company or local authority with rental transactions automatically settled and each trip logged on a blockchain system. He says the company is now in the process of working with a select number of clients to test out its Tesseract system with a series of live trials and, if successful, these could be expanded. By July next year EY expects to be in the pre-production phase ahead of rolling out Tesseract to interested clients.
Mr Simlett notes the Norwegian capital Oslo has pledged to ban private cars from its city centre by 2020 and that a move such as this replicated in other major urban centres could propel vehicle-sharing. London has embraced car-pooling more than any other UK city so far, for various reasons from parking restrictions in the capital through to the rising expense of car ownership.
Richard Laughton, the chief executive of easyCar, says the strongest growth in his business more recently has come from its peer-to-peer rental division ahead of its other business, acting as an aggregator for third-party car hire companies at airports. The company posted pre-tax profits of more than £1m in 2016 and expects that this could grow by as much as 25pc this year.
He reckons that the country’s changing demographic make-up is a “key driver” for car-sharing, given more people, particularly in cities, are delaying the purchase of a car. Half its peer-to-peer members are in London, with the remainder spread across cities such as Edinburgh, Manchester, Bristol, Leeds and Glasgow.
“A growing number of cars are on some form of finance now too, which shows people are used to the idea of not owning one,” he states.
He also noted that, while renting out houses or rooms within them is something many are familiar with, “renting out your car is a bit new, so there is a behavioural shift we have to encourage”.
Yet more evidence that private car ownership could be peaking is the growing interest of the car manufacturers in the sharing sector.
Giants including Daimler, Toyota, Peugeot, Volkswagen and BMW have all invested in the sector recently cognisant of the fact it could be a key purchaser of cars in decades to come and that they ignore the burgeoning trend at their peril. Just last month, Daimler led a $92m (£69m) fundraising drive by San Francisco-based Turo, one of the largest peer-to-peer car rental companies in Silicon Valley.
Deloitte’s Mr Thiyagarajan said the “biggest threat” to car producers from car-sharing was that it reduces ownership. “Carmakers have a clear choice – contribute to the car-sharing industry in an attempt to hedge their bets or ignore it completely and run the risk of losing out on car sales with no experience and understanding of how to sell into the car-sharing industry,” he says.
EasyCar’s Mr Laughton also said his company was having “very early stage” discussions with carmakers about potential collaborations. Such deals could be a useful way for carmakers to sell their newer electric – and possibly, in the future, autonomous – cars, which are likely to initially be too expensive for many individuals. Securing a customer base for such things as electric vehicles also makes sense, especially in light of the announcement by Paris just last week that it wants to banish petrol and diesel cars from its centre by 2030.
Mr Thiyagarajan points out that electric vehicles would appeal to car-sharing companies’ agendas due to them being greener and more economical. “We are already seeing a number of hybrid options (VW Golf hybrid with ZipCar) and fully electric vehicles (BMW i3 in DriveNow) penetrating fleets.”
Zipcar’s Mr Hampson says there is an incentive for carmakers to get their models into car-sharing companies’ inventories for when car-share users become owners.
“I think it is a reality that people don’t live in cities all their lives and people who have used the cars in our service get to know them well and so when they consider buying a car there’s a chance they might buy what they have been driving,” he says. “The car manufacturers do see it as a great opportunity.”
Carplus, an independent charity which monitors the car-sharing industry, says in its 2016-17 survey that 18pc of the car club fleet in London is electric or hybrid.
Its data also shows that in the past 10 years there has been a 765pc growth in car club membership across the UK from 32,000 members in 2007-8 to more than 245,000 members in 2016-17, using more than 4,000 cars. During the same period, more than 250,000 privately owned cars have been sold by club members who have adopted vehicle sharing.
Developments within the car-sharing industry are also likely to hasten the adoption of the service. Jonathan Hampson, Zipcar’s general manager in the UK, said his firm had recently launched a one-way service whereby users could start and end their hire in different locations.
“We think one-way trips will be a bigger part of our growth,” he predicts. “It is more difficult to organise and what it has required is for London boroughs to let us park our cars anywhere.”
Peer-to-peer rival HiyaCar has also recently raised £2m – including money from crowdfunding site Seedrs and from the founders of the photo-printing company Photobox – to launch its QuickStart keyless technology which allows users to book, unlock and start the cars they hire all by using their mobile phone.
The technology went live in August and while only 2pc of car owners on its platform had adopted QuickStart, 22pc of people hiring cars went for vehicles with it on, showing the appetite for on-demand access.
“Our target is to have the largest keyless fleet in the UK,” said chief executive Graeme Risby.
And easyCar’s Mr Laughton is trialling a scheme with fewer than 100 of its best renters whereby the individuals buy a second car and the company pledges to guarantee a return for them on their investment.
With money flowing into the sector at home and abroad and companies including easyCar eyeing international expansion, car-sharing could finally be getting out of first gear.