Future of Mobility: Growth & Investment sees Carsharing become mainstream

Published: 4 Jul 2014

With a 52% growth in members and considerable investment in 2013, carsharing is becoming a mainstream Urban Mobility solution, but policy support is required to allow the market growth to continue.

Introduction

The carsharing market continued to grow at a rapid pace 2013, so much so that 2013 is being referred to amongst the industry and associations as the year that carsharing and shared mobility went mainstream globally (almost - I'm awaiting news of an African car club to complete the carsharing global footprint)! With global membership rising 52% year on year, considerable investment from vehicle manufacturers and rental car companies in particular, and diversification of the business model (e.g. Low cost carsharing and corporate carsharing), we are seeing carsharing as an Urban Mobility solution become commonplace.
Continued Carsharing Growth & Investment

Also referred to as car clubs, or temporary rental of vehicles usually by the minute or hour, we saw carsharing membership grow from 2.3m to 3.5m between 2012-2013. Frost & Sullivan had forecast in our last detailed carsharing research report in 2011 that there would be 3.3m members by 2013, so whilst broadly in line, it is encouraging to see the customer adoption accelerating even quicker than we predicted, owing to higher than anticipated growth in Asia in particular. The corresponding vehicles rose from 55,000 to 69,000, indicating a global member to vehicle ratio of over 50, which is generally regarded as a sustainable and potentially profitable level depending on the vehicle utilisation. As such, our forecast of 26m members and 500k carsharing vehicles by 2020 is a small step closer to reality, although several conditions and policies are likely to be required to see this level of adoption.

Significant investment and merger/acquisition activity was seen in 2013, with Avis acquisition of Zipcar being the most high profile deal, worth a reported $500m. Having spoken to both parties, what I found most interesting of this was the combination of cost/operational efficiencies that could be achieved (such as zipcar benefiting from vast fleet purchasing economies of scale & franchise expansion opportunities), and Avis benefiting from moving towards virtual rentals and the technology Zipcar has developed over the years to facilitate this.

Furthermore, Enterprise continue to quietly acquire and integrate independent carsharing brands as part of Enterprise Carshare, with Phillycarshare, iGo and Autoshare all becoming Enterprise companies. With Hertz continuing to expand their Hertz 24/7 carsharing brand, reportedly looking to equip up to 500k of their cars to enable Carsharing rentals by 2016, it's clear the lines between carsharing and "traditional car rental" are already becoming very blurred, something that is set to continue and begin to merge with more longer term rental/leasing business models.

However, it's not just rental firms entering or acquiring the key companies in the market; 2013 also saw the continued growth of a new and unique low cost carsharing model, pioneered by Citeecar in Germany. Their continued growth to 4 German cities in 2013 with a reported 5,000 members by the end of the year is set to expand across Europe in 2014-2015, with a further €8m investment from their venture capital partners set to facilitate this. It's unique in developing a "host" based model that is somewhat a hybrid of traditional and peer to peer carsharing, with individuals offering their own parking facilities and light maintenance of the vehicles (known as "citee angels"), enabling a lower operational cost to the business, which in turn is passed to customers with a market leading price point of €1 per hour.

Key Carsharing Companies

Besides acquisitions, 2013 also saw the rapid expansion and investment from a few incumbent operators. Zipcar remain the world's largest carsharing operator in terms of members, with over 850,000 members globally, up from 770,000 in 2012. However car2go realised a more rapid proportionate growth, increasing their footprint from 18 to 25 cities, and raising membership from 320,000 to over 600,000 in the process; indeed 2014 has already begun with their entrance into a 26th city (Rome) and the initiation of car2go black in Hamburg and Berlin, their new premium station based service using Mercedes (B class) vehicles - the first time car2go has used anything but Smart cars in their offering.

Both firms will be looking to grow significantly again in 2014, zipcar targeting 15 new cities through a mixture of managed and franchised growth, the first step towards leveraging significant operational synergies through their new parent company Avis. Car2go on the other hand are looking to add 5-10 new cities to cross the 1 million member mark in 2014. BMW's DriveNow have also committed to increase their footprint by over 15 new cities in 2014, and Paris Autolib operator Bollore group are looking to bring similar services to Indianapolis, London, and an Asian city in the next year.

Carsharing Outlook 2014 and beyond

With several other interesting launches proposed, Frost & Sullivan believe the market could reach close to 5m members in 2014. This will be realised by a combination of growing established carsharing markets such as the US, Germany, and Japan (which already have over 2.4m members in these 3 countries alone), and rapid growth in a new wave of carsharing locations, such as Italy, which grew from 30,000 to over 130,000 members from 2012-2013 for example, led by car2go and Enjoy (ENI/Fiat) in particular, both of whom doubled their fleet size within a few months of launching owing to impressive member adoption.

Furthermore, the continued growth of carsharing in Asia will contribute significantly to the market growth; with 700,000 members in 2013 (20% of the total market) set to grow to over 1m in 2014. Japan led the way with growth from 290k in 2013 to 460k members in 2014, followed by Korea with over 200k, but 2014 could also see China adopt the carsharing business model on a larger scale, with significant growth plans of CCClubs and Kandi Technologies interesting “carsharing vending machine concept”, targeting up to 10,000 of the electric vehicles when the scheme reaches full operations in the next two years. This continues a trend that has seen electric carsharing vehicles implemented in Japan (with Choimobi from Nisasn and Ha:Mo from Toyota), and Korea with a few providers using the Kia Ray EV, such as LG owned City Car which have 325 of the vehicles. This could point towards further deployment of EVs for carsharing in future, to combat the growing pollution and congestion challenges, and using particularly small vehicles (such as the Toyota iRoad) that are easy to park, zero emission, and cost effective; this will be particularly important for markets such as China where taxis and transportation are relatively cheap, for example.

Carsharing gaining prominence amongst Policy Makers

This continued global growth makes the requirements and discussions with governments and policy makers more important than ever. Policy for carsharing is at a relative crossroads. Whilst most authorities are well aware of the business model and potential, many are yet to be convinced of the impacts that can be realised, and can't see past how carsharing adds more vehicles to their roads. This ignores some of the previous analysis that shows carsharing vehicles can replace over 15 private vehicles from the road, depending on the implementation environment and intensity. Some cities are actively incentivising the entry (Paris, Stuttgart, and Amsterdam, for example), but some are maintaining a rigid stance or are setup in a way precluding rapid growth or implementation for new entrants.

London has been the classic example of this, with 33 individually managed boroughs to speak with to obtain parking permissions, which makes it difficult to scale across the capital, and indeed saw car2go exit the market in early 2014 owing to challenges scaling the business in an acceptable manner. The main problem is parking, which is often charged at up to €200 per month per car across Europe; but it's not just the price that's the issue, it's the willingness to even accept a parking application in many areas that are already oversubscribed with residents permits, for example. However, having engaged with several cities discussing carsharing, and seeing the initiatives that are being considered by several cities, we expect to see much more engagement between car clubs and policy makers over the next year to ensure sustainable growth of the market can continue - check out Zipcar's recent car Lite London paper for example.

Diversification of Carsharing businesses

Finally, with the continued investment, awareness, and resulting expansion will see a diversification of the carsharing business model. We have seen how new peer to peer services have enabled private individuals to rent out their own vehicles, and new corporate carsharing services such as AlphaCity (from Alphabet/BMW), and Shareyourfleet (PSA/Sixt) in 2013, which is already tempting several others - Daimler have recently launched their corporate carsharing offering in early 2014 for example. This shows the still relative dynamic market in which carsharing operates, capable of innovating and evolving the business model from year to year; we expect this innovation to continue in 2014-15 to both polarise the offerings based on price, and expand into new segments such as further integration the corporate travel market for example, as well as enabling fully smartphone capable rentals with the growth of Virtual Keys replacing RFID smartcards.

Despite some of these relative startup characteristics, carsharing can no longer be considered a niche business model; with the aforementioned member growth and investment levels seen, carsharing continues to become a mainstream urban mobility business model, and long may it continue. With the right balance of policy levers and targeted expansion from these ambitious companies, the next few years will be crucial to enable the clear market potential being fulfilled.

Get involved

Frost & Sullivan have recently completed a global carsharing research and outlook report, to address the market growth to 2013, highlighting all key global carsharing trends and announcements, and forecasting market developments for 2014. For enquiries about this study or to access the full report, please contact the author at martyn.briggs@frost.com. Carsharing will feature as a core element of our annual Urban Mobility workshop on 25th June 2014, to attend please register at http://urbanmobility.gilcommunity.com/

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