Frost & Sullivan Market Insight   Published: 28 Jan 2010
Carsharing: A Sustainable and Innovative Personal Transport Solution with Great Potential and Huge Opportunities
Date Published: 28 Jan 2010

By David Zhao, Research Analyst, Frost & Sullivan Automotive Practice

The economic recession that started in December 2007 in the United States had a huge impact on the global automotive industry. Consumers were forced to be cognizant of fuel efficiency and transit costs. While vehicle manufacturers focus on the development of fuel-efficient vehicles, such as hybrids and EVs, alternative mobility services are receiving attention. Among these services is carsharing, a sustainable and innovative personal mobility solution that is a rising star. The carsharing industry grew significantly in the past two years, showed great potential, and implied huge business opportunities for the stakeholders.

Carsharing is a mode of transport where vehicles are owned by a separate firm or an organization, and shared amongst a number of people throughout the day. Carsharing can also be considered an organized short-term car rental where users access a firm's vehicles maintained in a close network of vehicle locations called "Pods." Starting in Europe, carsharing came to North America in 1994 as an alternative solution to meet the mobility gaps between public transit, taxi, bike, car rental, and private vehicle travel. Carsharing provides its members with the benefits of private cars without the costs and responsibilities of ownership.

The two major social benefits of carsharing are fewer vehicles on the road and lower emissions. Research from Frost & Sullivan estimates that, on average, each shared vehicle replaced 15 personally owned vehicles in 2009, and carsharing members drove 31 percent less than when they owned a personal vehicle. These two factors translate into 482,170 fewer tons of CO2 emissions and less travel congestion in urban areas.

Consumers benefit from carsharing by being relieved of ownership costs. Frost & Sullivan research shows that an average car owner who drives 12,000 miles a year at an average driving speed of 30 miles per hour can save US$ 1,834 by shifting to a carsharing service. Commuters who drive less than 12,000 miles can save more.

Those benefits, plus the influence of the economic recession and the increasingly stringent global greenhouse gas emissions regulations, fostered the growth of carsharing in both North America and Europe. Between 2007 and 2009, carsharing membership rose by 117 percent in North America.

The trend is expected to continue over the next five to 10 years. According to Frost & Sullivan research, carsharing membership is expected to reach 4.4 million in North America and 5.5 million in Europe by 2016.

Chart 1: The Growth of Carsharing Membership and Total Shared Vehicles (North America & Europe), 2009 - 2016

The fast development of carsharing programs is a double-edged sword to the vehicle manufacturers. On one hand, it means sales opportunities. Carsharing organizations are actively seeking fuel-efficient, low-emission, low-priced, and trendy vehicles. Whoever satisfies this demand can convert potential sales into real, increasing businesses. On the other hand, as carsharing vehicles replace personal vehicles, a further decline in new vehicles sales is expected. It is a trend that WILL happen, and vehicle manufacturers need to carefully gauge the potential impact on their total sales.

To better understand the influence of carsharing, readers need to comprehend some of the key implications that are influencing personal transportation in North America:

  • As carsharing programs cover the cost of fuel, vehicles with high MPG are preferred.
  • Because of the nature of the business, carsharing programs need only the most basic of trims. If a company can offer additional options and features at minimal cost, it is highly likely that carsharing programs will purchase large volume to save costs.
  • From the consumers' perspective, features such as telematics (GPS) as a basic feature on the lower-cost models would aid in image improvement.
  • As consumers are used to purchasing vehicles they are most familiar with, when the campus/young carsharing members immigrate into the "own car" consumer group, they are more oriented toward buying the brand that they used in the program.

An exciting sub-plot to the carsharing story is the role of electric vehicles (EV). EVs are trendy, "green," and naturally appealing to carsharing programs. Frost & Sullivan researchers forecast that, along with the development of the electric charging infrastructure, the sales of EVs will significantly increase after 2011. Due to the economy of scale, it is reasonable to see some price reduction. Consequently, EVs will be increasingly leveraged by the carsharing programs after 2012. By 2016, one in five new shared vehicles and one in 10 total shared vehicles is expected to be an EV. That means huge business opportunities for EV manufacturers.

Facing the development of carsharing, some OEMs have chosen to join the game. Daimler, for example, launched its own carsharing subsidiary, Car2Go, in Europe in 2009, and penetrated the North American market on Nov. 17, 2009. Car2Go will provide 200 Smart Cars for 13,000 employees of the city of Austin, Texas, to use. Frost & Sullivan believes that this event opened a new era for the automotive industry and could accelerate the development of carsharing.

This article is based on Frost & Sullivan's studies, N748-18, "Sustainable and Innovative Personal Transport Solutions – Strategic Analysis of Carsharing Market in North America," and M4FA-18, "Sustainable and Innovative Personal Transport Solutions – Strategic Analysis of Carsharing Market in Europe."

For more information, please contact Johanna Haynes, Corporate Communications, at 210.247.3870 or johanna.haynes@frost.com

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