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Need a lift? The business of sharing a ride

As consumers quickly adapt to the notion of a sharing economy, the future of private car ownership looks set to decline. Insero Group’s mobility expert, Søren Bernt Lindegaard outlines the business models that will fill the void

Three notable trends look set to change the current automotive business model: ride-sharing, ride-sourcing and car-sharing.

In order for these trends to develop into viable business opportunities, however, it is a prerequisite that those involved make full use of all available digital technology. Applying easy-to-use technology to car-sharing solutions will remove any hassle or wasted time associated with ‘sharing’. It will also make driving with others far easier and more convenient than ever before.

Ultimately, the days of the car as a personal possession are numbered; rising motoring costs will put private ownership out of most people’s reach, and the car will revert to being a status symbol

The business of sharing a ride

Ride-sharing is a classic form of transportation, one that goes back many years. Indeed, it is commonplace to drive together to work, to the cinema or to visit friends or family. However, as the years have progressed, ride-sharing has become an even more common form of transportation. People used to share a ride only with people they already knew, or as part of a regular agreement with a colleague about sharing a lift to work. However, ubiquitous Wi-Fi and smartphones in our pockets mean we can now easily go wherever we desire, whenever we desire.

Furthermore, there is a trend amongst ride-sharing operators towards leasing private cars to customers, provided that the customer agrees to make his or her leased car available to other users. As an example, GoMore today has 1,000 of its own cars on the road and aims to have at least 100,000 cars on the road in 2020.

By leasing private cars, the ride-sharing operators are less dependent on their customers’ willingness to share cars; at the same time, they are successfully expanding their business model. Consumers have the ability to lease a car at a more favourable price than that offered by a regular car leasing company – the only catch being that users agree to make their cars available to others.

Ride-sourcing is an extension of ride-sharing. Besides sharing a ride, car owners now make money from transporting people around. Now it is not only a question of better using the space in the car, but also offering consumers a cost-competitive and flexible transport solution. Peer-to-peer transportation is thus established based on a form of transportation that easily could be characterised as taxi driving.

Car-sharing: From big city to country village

Compared to ride-sharing and ride-sourcing, car-sharing goes to the next level and involves sharing a car with other people. Initially, car-sharing was primarily a stationary concept, with the car picked up from and returned to the same fixed parking lot. However, during the past decade we have seen the rise of several so-called ‘free-floating’ concepts arise, which provide users with access to an entire fleet of cars that can be picked up and delivered anywhere. Examples of stationary models are LetsGo and TADAA!, two nevertheless very different models conceptually. TADAA! targets existing communities like housing associations, offices, hotels or small villages, whereas LetsGo, instead of targeting specific communities, merely seeks to establish a large parking lot with its fleet typically near the town centre.

Car-sharing concepts can be established in many shapes and forms. TADAA! provides very small communities with an economic foundation for starting a profitable car-sharing business, while DriveNow operates at the other end of the scale, taking an extensive customer base to create a business that is both profitable and user-friendly.

The different car-sharing concepts can easily supplement each other. As an operator, DriveNow is better suited for bigger cities, whereas TADAA! is also well suited for smaller communities.

Self-driving cars take car-sharing to the next level

All the different types of car-sharing services have a bright future, especially when factoring in new self-driving car technology. In the future, ride-sharing, ride-sourcing and car-sharing will look ever more alike.

Ride-sharing, for example, will become more structured. As the concept evolves, users will no longer need to decide whether they have room for a passenger, what price range they prefer and so on. With pre-configured comfort settings, the cars themselves will define the extent to which ride-sharing can be optimised. However, there will still be an owner present in the car.

Car-sharing will become even more common; the cars will be able to find their way back and forth in the cities, enabling even stationary concepts to become more agile. Users can get a ride to wherever they need to go, and until they need the car again, it can service other users as a taxi or return to its point of departure, from where it can be of service to other users.

Ride-sourcing will be fully automated, and the taxi business will be without drivers. An element of ride-sharing will still be present as the users would be able to allow other users to join some or all of the trip.

These trends will have a significant impact on the ownership structure of the operators as car-sharing will be mainly driven by large fleet owners. The same will be the case for ride-sourcing operators, even though there will still be a place for privately-owned cars, which will be administrated by a third party. The model will also apply for ride-sharing, where private car ownership will be administrated by a third party, and many of the large operators in the market will have built up large fleets, very much like the GoMore business model.

Ultimately, the days of the car as a personal possession are numbered; rising motoring costs will put private ownership out of most people’s reach, and the car will revert to being a status symbol. 

 

This article appeared in the Q3 2016 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.