The road ahead
Car sharing is hailed as the future of personal mobility, so why isn't it making more money?
• It’s 6.30 pm on a weekday in a German city. The map on your smartphone is blank, with no reassuring icons indicating available cars nearby. They have all been snapped up; other drivers got there first – again. It’s a familiar scenario for anyone registered with a car-share app such as DriveNow or Car2Go. At rush hour cars are in short supply. But it’s the reverse problem for the providers: apart from peak periods, their cars are mostly standing around empty.
Access without ownership is the slogan of the sharing economy. On average, a privately owned car is unused for nearly 23 hours a day, often taking up public parking space as well. Futurologists believe cars will become less important as status symbols, arguing that one day there will be few private cars left, least of all in big cities. Instead, people will use a mix of self-driving electric cars, public transport and bicycles.
But those days are a long way off and Germans still love their cars; every year more cars are registered, even in big cities with plenty of alternative transport. In January 2018 some 46.5m cars were registered in Germany, up from 45.1m the previous year. Of these, only 17,950 – 0.04% - are car shares. However, the number of shared cars and customers is growing. There are now more than 2 million users, according to the German Car-Sharing Association (BCS). But some of those customers are registered with more than one provider so are counted several times. And the number of dormant or inactive members is unknown.
Unlike schemes where the car has to be returned to the pick-up point, so-called “free floaters” can be left anywhere in the area where the company operates. The BMW subsidiary DriveNow and the Daimler-owned Car2Go are the only two national free-floating providers in Germany. They own 40% of the shared cars and claim to have more than 1.5 million registered customers. Some 161 “stationary” operators, including Stadtmobil and Cambio, account for the rest of the German car-share fleet with 500,000 customers. Stadtmobil and Book-n-Drive also have some flexible floating vehicles.
But making a profit with free floaters is difficult. Neither Car2Go nor DriveNow could have stayed in business without the big carmakers propping them up. DriveNow, which operates throughout Europe, claims to have been profitable in Germany since 2014, but its annual report admits that the business as a whole is still making a loss. Car2Go is larger, operating in 26 cities around the world, but its press officer is vague about its finances, saying only that it is “profitable in more and more cities”.
Neither firm offers a breakdown of figures for individual cities, but one example may give a picture close to the truth: Hamburg is one of Car2Go’s most successful cities with 800 cars for 150,000 customers. In the three months from January to March 2017 those cars were used nearly 600,000 times, which works out at about eight trips a day per car. These figures match the car-sharing data recorded by Stefan Weigele of Civity, one of the leading consultancies for public services in Europe. “In Hamburg a journey takes 20 minutes, on average,” he says. At a charge of €0.29 a minute that makes a turnover of €46.40 (£40.80) a day per car, or €13.5m annually just in Hamburg.
On the move – but available
It is not so easy to calculate the costs for each car. A private Smart microcar being driven for 30,000km a year costs roughly €2,200 a year (at 15 cents a kilometre) including fuel, insurance, road tax and servicing. For a fleet of 800 Smart cars that works out at €1.8m a year, with bigger cars obviously costing more. That does not include the price of buying or leasing the cars, the hardware and software required for hiring them out, cleaning and repair costs – which are higher for car-sharing – and the parking fees the providers must pay to the cities. Munich, for example, charges a flat rate of about €1,000 a year per car. There are additional costs when cars have to be collected from outlying areas and reparked in busier ones to avoid them standing unused for too long. “If you add all that up, then there is not terribly much left,” says Weigele. “But you can say that if a car is getting eight to 10 journeys a day, you’re in business.”
Yet that is still far from being the case in all cities. In Munich, BMW’s home town, DriveNow has 750 cars and 200,000 customers. In Milan there are only 77,000 customers for 500 cars. The providers have to strike a balance between using capacity and availability. The more often and the longer the cars are being used, the more profitable the business. But if that results in too few cars being available, it becomes unattractive for the customer. The more mixed the area – with people living, working and shopping in a relatively confined space – the better the model works. In smaller towns the cars would be standing idle for too long in residential areas. Sebastian Hofelich, chief executive of DriveNow, says, “At present we are concentrating on the big cities in Europe.”
More rural areas are served by stationary providers. Their business model is more like that of conventional car-hire firms. The two biggest, Stadtmobil and Cambio, both emerged from the environmentalist movement. Their aim was to cut car traffic, not necessarily to make big profits. Their fleets are operated by limited companies or corporations in the individual towns. “They are not huge cash cows,” says Weigele. But making a quick profit was not the primary goal of the free-floating providers, either. They were initially out to establish themselves in the market, gather data on consumer behaviour and wait for the future of mobility to arrive, the future everybody is talking about. So the big concerns kept their subsidiaries afloat. DriveNow leases its cars from BMW for one or two years. They come fitted with the necessary hardware and software “on standard market terms”, says Hofelich.
Data can be valuable. Companies love transparent customers and those who access car-sharing providers through their mobile phone reveal a lot about their driving conduct. Hofelich puts it cautiously: “In order to analyse the data, the main thing is to ask the right questions. Otherwise the data is not much use.” They are still searching for a lot of those right questions. But all car share companies say they are not going to sell the data. The motor manufacturers also see their car-sharing vehicles as a way of promoting electric mobility. Ten percent of the fleet is electric, which is about 130 times the average ratio for cars in Germany. The two top dogs, Daimler and BMW, have at least managed to practically corner the market. “New suppliers now find it extremely difficult to get a footing,” says Harry Wagner, professor for automotive and mobility management at the Technical University in Ingolstadt, Bavaria. “Especially if they lack experience in the mobility sector and have no infrastructure.”
A prominent victim of the tough competition was the stationary provider CiteeCar, which went bankrupt in 2016 when the investor was not prepared to inject any more capital into the struggling business. Citroën’s free-floater Multicity capitulated at the end of 2017, blaming inadequate infrastructure for recharging electric cars. Its fleet was largely electric. DriveNow and Car2Go have recently announced they are to merge. Customers may only have to visit one platform, the fleet would be expanded and could be distributed better. But interviewed before the announcement, Hofelich did not wish to comment on the rumours. “In the next few years car-sharing is likely to get cheaper,” was all he would say.
Even so, if the service is to develop into a really lucrative business, there has to be greater public acceptance, and private car ownership has to become less attractive. Driving bans in congested town centres - a prospect currently in the news – might play a role. In 2017 in a new car-sharing law came into force in Germany. It allows cities and municipalities to designate special free parking for share cars. A higher proportion of shared cars would mean fewer cars in total in Germany but not much less motorised traffic on the roads. But at least the parking problem would be eased and the roads would have fewer drivers searching for somewhere to park.