Fractional Car Ownership – Still not quite the Airbnb Model

All of us would have seen that golden graphic that shows how Facebook, Uber and Airbnb have created billion dollar enterprises without owning any hard assets. The last few years has witnessed this thought creeping into the automotive space especially on two areas – short and long term ownership/usage models. One interesting announcement around this space came from Ford recently –

https://www.businesswire.com/news/home/20160111005443/en/Consumers-Share-Vehicle-Ford-Credit-Link-Pilot

First a look at everything interesting in this space

• Fractional Ownership - Ford joins Audi in the launch of an interesting leasing experiment that allows a self-organized group of 3-4 (Audi’s case) or 3-6 (in Ford’s case) to share a lease on a vehicle for up to 24 months. Truth be told these two are the first of its type experiments that looks to take a leaf out of what was estimated to be in excess of a $10 billion timeshare market. The big behavioral question here is the organization behind the self-organized group and how each individual’s schedule is going to play in the mix.
• Technology Support – In both Ford and Audi cases users can reserve vehicle, check on maintenance and talk to each other through a smartphone app. This is purely taking a leaf out of the carpooling or p2p car sharing market. The idea here is to create a seamless experience. Again in reality how this is practically going to play out remains to be seen.
• Regional Variations – For instance, GM’s recently announced traditional car sharing program (am thinking is a roundtrip program available at 21 parking locations in Ann Arbor) Maven is very different from what brand Opel offers in Germany called CarUnity which is more a free for all p2p Carsharing approach. One reason for this degree of variation is the availability of wider public transportation that makes it possible for OEMs to experiment more in Europe vs. only a few cities in US like SFO, Austin and Ann Arbor that also has similar infrastructure. GM with Maven has taken a cost effective approach by making the hourly and daily rates cheaper than Zipcar and also add EV models like Volt and Spark to the vehicle mix. And with Opel already talking about extending CarUnity to ridesharing the model will continue to evolve and not be a one-off effort.
• Growth of One-way Carsharing Models – this is where European luxury OEMs like Daimler have led the way with Car2Go service reaching in excess of 1M operating across multiple cities in the US. Even Zipcar has started offering one-way Carsharing in cities like Boston. The idea here is to take a cue from bikesharing programs and in some cases it has been proved mathematically that these programs can be cheaper than Uber or other means. Again this program is not without its worries, BMW in November 2015 closed down its DriveNow program in SFO citing parking permit issues as the main reason.
• E-hailing - The model that continues to lead the true definition of shared economy model challenging conventional car rentals and all type of Carsharing programs is the Uber model. Apparently leaked documents published by Reuters indicate that the company is on an awesome growth trajectory despite the regulatory and driver backlash it’s facing at an revenue estimate of $2 billion for 2015. Yes it is not profitable yet but the ramifications of the growth of this model and the fact that technology innovations like automated driving is being added to the mix (efforts by Uber and one reason for GM’s investment into Lyft) makes it even more interesting in the longer run.

Here are a few interesting observations and takeaways from this

• Me-Too Strategy - There seems to be a mad rush from automakers to enter this space. BMW and Daimler were the first to go at this at comprehensive level forming separate business divisions for its mobility integration efforts (Daimler has a target of $1 billion revenues for Moovel by 2020 according to announcements). The only volume maker that seems to be targeting this from an end to end level is Ford (through its smart mobility program) and the rest of it seems to be experiments with very short shelf lives with the way they are set up.
• Car As a Service - Another interesting observation is how a few automakers are looking at a third revenue stream beyond new car sales and aftersales by creating new services that combines one or many on-demand services like Carsharing, connected services like smart parking. The key to the success of this lies in the connectivity and data strategy of OEMs and their ability to create business models that is not one size fits all. Ford CEO has mentioned this clearly in his recent speeches at Detroit Auto show and CES. But truth be told, GM has one superstar up its sleeve called OnStar and this new revenue stream could be the silver bullet use case to hook users onto OnStar. Already the Maven program does use OnStar but the possibilities are endless.
• Data Deluge – Car2Go published some stats around miles driven, trips taken and duration of trips in December 2014 when it crossed 1M users in US. Taking that as an example as more automakers jump into this game, there is a massive opportunity to understand user behavior, vehicle usage, connected services needed and so on that automakers can bring into their conventional vehicles as well. Audi’s Unite program in Stockholm is worth mentioning here because there the 3 or 4 people who share the vehicle lease actually pay for how much they use. This is a leaf out of the UBI business where the first programs launched focused on user premiums that are designed purely on miles usage. With more data and user understanding, these types of mobility programs could enable OEMs to design and launch new UBI programs for example with insurance carriers (who struggle with program designs and operating principles).
• Intelligent Mobility – More automakers are joining the mobility integration bandwagon, more automakers especially luxury brands are accelerating their EV efforts and most importantly every automaker nearly wants to launch some level of automated driving by 2020. The result of this is intelligent mobility that is contextual (all the talk around machine learning – check out the Mercedes Benz companion app), eco-friendly and safe and ultimately self-learning (HERE naturalistic driving layer on its HD maps). The winner here will be the one who has a balanced vehicle portfolio, appetite to look at new technologies and partners and most importantly can devise business models not in the conventional one-time hardware sense but more in the App store business sense. Faraday Future remains interesting for these very reasons and the day they announce their innovative usership models other automakers will be forced to move faster in the mobility integration space.

Google could also end up surprising us in this space with its RideWith Carpooling + true self driving (a space where Google has indicated interest in controlled environment like university campuses). Right now the battle is on between the conventional OEMs on the mobility integration space but the future might see technology vendors ruling this space.

And this is one heck of a good read on this space where Susan Shaheen, director of Innovative Mobility Research at the University of California, Berkeley's Transportation Sustainability Research Center cuts this mobility space in many interesting ways - https://www.greenbiz.com/article/zipcar-google-and-why-carsharing-wars-are-just-beginning