Today's Millennial generation isn't buying cars or getting driving licences so why aren't the OEMs getting worried? Brendan McNally finds out. [Mob.McNally.2016.01.15]

Continued from Part I

Car-sharing

Just as ride-sharing was predated by taxicabs, car-sharing's predecessors are car rental firms like Hertz, Avis, and Alamo. These are large companies with giant vehicle fleets and customers that usually the vehicles usually for several days at a time and, sometimes, for considerably longer periods. Reservations usually would be made days or weeks in advance and the vehicles picked up either at airports or special downtown locations. Car-sharing, on the other hand, takes place on the spot with little, if any prior arrangement other than being previously vetted via the downloaded app. The other thing that makes car-sharing different from “car rental” is that they are mostly used for single, point-to-point rides. Using their smartphone app, a customer can locate a parked vehicle, unlock it, and drive it for as long as they want, then park it, get out and the transaction is completed. They pay only for the capability they use. The smartphone app extracts payment usually on a minutes-used basis.

Dr. Susan Shaheen, co-director of the University of California at Berkeley's Transportation Sustainability Research Center and a leading researcher on car sharing and the 'sharing economy,' sees the growing trend towards vehicle-sharing as a very good thing. “Our research shows that each shared car takes between nine and thirteen vehicles off the road,” she says. “These include vehicles that get sold and those whose purchase is postponed. Households with more than one car that engage in car-sharing will usually get rid of at least one vehicle.” With this reduction of vehicles on the road, she says, comes a sharp reduction in emission of greenhouse gasses.

Compared with the number of vehicles involved in ride-sharing, the number involved in car-sharing is still quite small. A recent TSRC study conducted during the fall of 2014 put the number of car-sharing cars in the US at a mere 19,115.  It is, however, roughly double the number that was in operation five years earlier. Even so, those vehicles were shared by a whopping 996,000 users. It's steady, though certainly not explosive, growth. Shaheen expects that will happen soon. “Right now a lot of things are beginning to converge,” she says. One being the way smartphones and downloaded apps are facilitating point-to-point car-sharing, which she says is a “big growth accelerator now the technology makes possible point-to-point mobility”.

A lot of the people involved in car- and ride-sharing are younger and well-educated and living in urban settings,” Shaheen says. “As far as we're concerned, it's already been accepted by the Millennials. Our question is when is it going to start reflecting Baby Boomers and Gen-Xers?”

But while ride-sharing can be made to work in nearly any metropolitan area, car-sharing requires an alchemy of very specific, favourable conditions to succeed. In San Francisco last autumn, at almost exactly the same time that Yellow Cab's crisis was grabbing media headlines, DriveNow, a car-sharing joint venture between the BMW Group and Sixt AG, very quietly suspended its electric vehicle car-sharing operation in San Francisco. DriveNow had proven to be a very successful concept in Europe where they've been operating a fleet of 3,000 electric cars in a number of European cities, including Berlin, Vienna, Copenhagen and London. They'd hoped to use San Francisco as a beachhead to enter the North American market. The problem was, they had not been able to get a change in parking permit regulations that would allow their cars to be parked on the streets without having to feed parking meters. In San Francisco, as in many American cities, parking and parking meters is a lucrative 'rice bowl' for certain municipal parties that they are loathe to part with, even if it might be for the greater good of getting cars off the street. It was enough to strangle DriveNow's efforts.

 “We fully expect to return once the city reforms its parking policies to allow for one-way car-sharing,” said DriveNow CEO Richard Steinberg. “In the meanwhile, we are focusing our efforts on new cities where our transportation solutions can flourish.” DriveNow was hoping to make Seattle the second city in its North American strategy. DriveNow and other car-sharing companies were seeking legislation from the city government for up to 2,000 free floating parking permits that would allow them payment-free access to parking meter spots as well as in restricted neighbourhood parking zones.

A ride-sharing company that has been successful is Car2go, a subsidiary of Daimler AG. Much like DriveNow, Car2go's originated in Europe but, instead of making their bridgehead in San Francisco, they started their North American presence in Austin, Texas. They have since spread to over a dozen North American cities, including San Diego, Seattle, Denver, Toronto, Vancouver, Brooklyn, Arlington, and Washington, DC.

“We're looking at cities with a robust public transportation infrastructure,” says Josh Moskowitz, regional director at Car2go. “Along with that is the right kind of population density and urban environment containing destination centres.” In order to be a good fit, the candidate city also needs to be a place where the people are used to taking public transportation and not necessarily having their own cars. One of the reasons for this, he says, is because many rides begin or end nearby public transit hubs, such as subway stations.

“The key to success is on-street parking,” Moskowitz adds. “The best advertising is the vehicle itself, because all the vehicles have the logos on them prominently.” In order to do that, they need to have cooperation from the city government and other major stakeholders. They need to be able to park either in restricted residential zone or in places where there are parking meters without having to feed the meters.

“We only go to cities in which the mayor and city government and major stakeholders are interested in working with us,” says Moskowitz. “Each city is unique and it's a different conversation in each city. Austin has been a fantastic city to start off in.  They welcomed us with open arms.”

Moskowitz says most users want the vehicles for a point-to-point ride. As long as it it's done within the operating area, that's fine. If, on the other hand, the driver is in Brooklyn and wants to take to vehicle to Manhattan, they're responsible for bringing it back to Brooklyn. He believes the operation will soon extend to Queens and, ultimately, to Manhattan, although he would not hazard a guess when that might take place.

Despite that, as Susan Shaheen claims, car-sharing takes cars off the road and keeps others from being bought, OEMs see it as in their interest to get behind it. GM president, Dan Ammann, put it this way during a recent conference call: “We see car-sharing as much more of an opportunity to GM than a threat. Cars used by single owners or families sit idle 95% of the time. Vehicles that are shared are used more and, therefore, will turnover more.  Higher vehicle turnover means increased turnover for carmakers like GM.” Amman estimated that 5-6M people currently use ride-sharing and car-sharing worldwide. He said he expects the number will expand four- or five-fold by the end of the decade.

For OEMs, the advantages of having a car-sharing arm are obvious. In every city where the car-share operates, they have several hundred vehicles on the ground and generating revenue. Moskowitz says Car2go never enters a market with less than 200 vehicles. If successful, the number quickly expands to easily twice that number.  Since the vehicles being used are often electric, or special vehicles, such as the Daimler Smart Car that Car2Go uses, it also introduces the customer base to a type of car that they might otherwise dismiss without further thought. Car2go exclusively uses Smart Cars, though currently in Vancouver, they are experimenting with a small number of higher-end Mercedes. According to Moskowitz: “People so closely associate us with Smart Car, that more than once people have gone into a Daimler showroom where Smart Cars were on display, and attempted to rent one.”

Car-sharing might be in its infancy but all signs indicate the OEMs will waste little time establishing, ramping-up and making it operational wherever feasible. Many OEMs either have some pilot car-sharing programme being stood up or they are re-imagining themselves away from being simply car manufacturers.

In addition to investing $500M in Lyft, GM has recently launched its own car-sharing service called Maven. It's starting with 21 spots in Ann Arbor, Michigan. At the same time GM is folding into Maven its existing car-sharing pilot operations in New York and Chicago. At the same time GM has been acquiring talent and key intellectual property recently defunct ride-sharing service, SideCar. While announcing Maven, Julia Steyn, GM's vice-president for urban mobility, predicted that 30M people will be using car-sharing within the next few years.

The Ford Motor Company is rebranding itself to “Ford Mobility,” with the new “FordPass” brand as an umbrella for mobility services. They have launched what they are calling their Smart Mobility Initiative where they are offering incentives, including financing to 14,000 Bay Area Ford owners to make their vehicles available for car-sharing by the day, hour and week. All this, though, is being overshadowed by the rumour that Ford is secretly working with Google to develop a driverless car.

Shortly after announcing GM's half billion dollar investment in Lyft, Ammann stated that he expects automated vehicles will be first deployed through a ride-sourcing platform father than directly to consumers. In a sense, the driverless car is as much at the heart of the rise of ride- and car-sharing as is the Millennial shift from ownership to capability. Ride-sharing and Car-sharing might now be two very separate enterprise categories but they likely converge once driverless cars become fully operational. Recently US Department of Transportation Secretary Anthony Fox announced that the upcoming FY2017 Federal budget will contain a $4Bn funding proposal designed to accelerate development of safe vehicle automation, through a number of real world pilot projects. It's a clear sign that driverless cars will be operational sooner than later. 

It's likely the OEMs recognise the need to have their sharing capabilities up and running in time to meet it because the real game changer isn't going to be getting people to buy self-driving cars as much as it will be to get them to use self-driving cars that they don't own.

Telematics Berlin 2016

17 May 2016 - 18 May 2016, Berlin, Germany

Realising the Hype: Connected Vehicle Data Transforms the Automotive Industry