Separating the ownership and use of cars
Financial Times Automotive Environment Analyst Issue 16, May 1996, p.11.
Contrary to what the title might suggest, this article is not about joy-riding, even though stealing a car certainly is an effective way of separating the use of a car from the intentions of its owner. However, more and more law-abiding citizens are discovering that in order to drive from A to B, one doesn't have to own a vehicle.
That, of course, is hardly a new insight. Car rental has been a well-established business for decades, and an increasing proportion of cars are leased rather than sold. Recently, however, people have started to think about how to go beyond the traditional one-driver-one-car scheme.
Car sharing: 'car-free is carefree'
Pioneered in Switzerland, the concept of car sharing took root in Germany in 1988. Since then, the idea has been spreading there as well as in other countries like the Netherlands. Frequently, the organisers of these schemes are driven by idealistic 'green' goals, like reducing the volume of traffic and relieving urban congestion. While many of the participants share these goals, they also derive individual benefits from the schemes. Not owning a car while having access to one when it is needed is a very attractive option for those with limited road transport requirements. Ideally, a car sharing arrangement preserves all the attractive features of individual transport, in particular the freedom from time and route constraints, while doing away with the hassle of owning a car.
Many small schemes are run by groups of friends who just want to split the costs of owning a car (the 'neighbourhood car' concept), while the larger ones have developed into sophisticated customer-oriented service organisations which also offer vans and other special-purpose vehicles. Generally, the cars are kept at collection points where members can pick them up after having made a booking over the telephone. This implies a number of restrictions as compared to the normal use of a car. For one, a journey to the collection point is required before the car trip has even begun. The time of use has to be determined beforehand, and the use is restricted to return trips.
When joining, members pay a subscription charge of up to £90 and a deposit of up to £570. Thereafter, they are charged a small monthly amount as well as paying for the distance driven (13-22 pence/km including fuel) and for the time of vehicle use (£0.88-£2.20/hour). The last two items are the ones that the user actually experiences as the costs of driving. They are rather high compared to what a car owner pays per kilometre (the purchase price of the vehicle is a sunk cost and does not normally enter a driver's considerations), contributing to the perception of car sharing as an expensive way of driving. For that reason, and because of the restrictions on usage, the participants of a car sharing scheme tend to be more conscious about their transport needs, so they generally drive less - a fact not lost on transport planners trying to reduce the volume of road traffic, who like the fact that people see and feel the marginal cost of their mobility.
Whether or not car sharing is economically advantageous for the participants depends on their pattern of use. In a report for the German ministery of transport, the University of Cologne found that the break-even annual mileage below which car sharing is attractive lies between 5,000 and 10,000 kilometers. Thus, the perfect customer of a car sharing scheme is a car-less city dweller who still wants the convenience of a drive to the supermarket or a weekend trip out of town. Another potential market can be found in corporate fleets where a car sharing scheme opens the possibility of partly or completely outsourcing the fleet provision.
Sharing is not renting
While car sharing schemes might be expected to encroach on the territory of the traditional car hire companies, they have in fact quite separate customer bases and usage characteristics. Typically, the rental firms have concentrated on business users, tourists and accident replacement cars, while the car sharers focus on residential use. Rental firms use a new contract for each rental which lasts for a number of days, while car sharers will often make their cars available by the hour. While rental firms typically keep their fleets at a cheap location out of town, sharing organisations strive to be close to their residential users. Although some rental firms consider moving into the car sharing field (in Germany, these include Hertz and Avis), they often coexist and even co-operate with car sharers, who sometimes rent extra vehicles over the weekends when rental firms experience low demand while car sharers have their weekly peak.
The potential market is substantial. Estimates put the German market potential at between two and eight million users (19% of the holders of a driving licence). StadtAuto GmbH in Berlin, one of the pioneers in the field which is among the biggest organisations in Germany, expects a fifty percent growth this year and sees no sign of the trend slowing down. Its car park presently consists of 140 vehicles, including vans and other special vehicles, shared by 3,200 members. By the end of 1994, an estimated 7,700 people were participating in car sharing schemes across Germany. Similar numbers are reported from the Netherlands where, under the title of Call-a-Car, an ambitious programme has been launched to combine the various individual schemes into a nationwide network in order to contribute to the aim of halving the projected increase in car use by 2010. The Dutch experience is that participants reduce their car usage by 30%.
Meanwhile, some companies have started to operate their own in-house car sharing schemes. The German airline Lufthansa has done it since 1989, to address the problem of limited and expensive parking space for its staff at Frankfurt airport. Meanwhile, its fleet of shared cars has fallen to 420, resulting in a reduction in required parking spaces of about 1,250.
Although carelessness and untidiness are problems with shared cars, the organisations tend to play down the impact of bad customer behaviour. A more serious obstacle to the widespread acceptance of the idea is the psychological value of the car beyond its use as a means of transport, touching upon themes like self-expression and the ownership of a status symbol.
From station safes to COCOS
The technical realisation of car sharing poses some tricky problems. Up to now most organisations work with so-called station safes which contain all the car keys belonging to a particular station where the cars are kept. Each member has a uniform key for all safes of an organisation. The potential for misuse and fraud is obvious, especially once an organisation has outgrown the early stages where some degree of social control exists between the participants.
Various forms of smart card systems have been put forward as possible solutions. The task is complicated by the demand for flexibility in order to allow different organisations to share cars and stations. One of the most sophisticated proposals has come from the University of Siegen, in Germany in cooperation with a company called Invers. Their modular scheme, called COCOS (Car-sharing Organisation and Communication System), involves an on-board computer and a chipcard. The system is designed to allow the efficient operation of car sharing fleets as well as providing an interface for the combination with other services like taxis or public transport. A fleet trial in Rotterdam is under way. Intelligent systems like COCOS greatly improve the way in which car sharing schemes can be run and may provide the key to their future success.
Selling mobility
While the car sharing idea is driven by individuals, green ideals and public policy, the car manufacturers have had thoughts of their own. For quite some time, the trend has been towards selling services and financing deals (leasing) along with the car. As the markets mature, consumers become more difficult to please, and carmakers struggle to retain customer loyalty. In this situation, carmakers like Volkswagen and Volvo have begun to consider the possibility of selling mileage rather than cars, possibly in the form of specially tailored leasing arrangements. This kind of deal would target a class of consumers quite distinct from the low-intensity user who is the preferred car sharer. Mobility would be sold in chunks of tens of thousands of kilometers, offering a new way of addressing the traditional customer, while more upmarket carmakers like Volvo might find this to be a way of addressing a new group of customers who previously could not afford their products.
In a different context, Mercedes Benz is thinking about leasing deals in connection with its ultra small Smart car. Since this car is a city run-about and not particularly suitable for highway cruising, the leasing programme would include access to a larger car for three weeks of the year in order to enable longer trips, like going on holiday.
Mobility can also be sold as a value added to other services. For example, today many apartments are rented or sold with a car park as part of the package. Why not provide the mobility as well, which is the motivation for having a parking space in the first place? Such an approach would open an additional marketing segment at a time of tough competition, as well as going down well with authorities worried about air pollution from old, badly maintained cars.
Combining public and private transport
One of the more radical proposals to tackle a range of urban problems, from air pollution to congestion to the problem of providing adequate public transport, is the TULIP concept developed by PSA Peugeot Citron. It involves small battery-powered two-seater cars which sit at recharging stations scattered around town, ready for a subscriber to unlock them with an electronic key and drive them to another collection point. The system has many features in common with car sharing schemes, aside from the much larger infrastructure requirement due to the electric drive. In particular, the ownership structure is similar in that users have to subscribe in order to gain access to the system.
More down to earth, but also trying to combine the strengths of public and private transport, is the station car concept. This scheme, targeted mainly at commuters, provides access to a fleet of cars parked near a train station as part of the train journey. The cars can be electric, as advocated by the US National Station Car Association (a field trial involving 40 vehicles is being set up in San Francisco), but the concept is also conceivable with conventional cars. Technologies like the chip cards described earlier can extend the station car concept to a general combination of public transport and car sharing schemes, as in a field trial currently under way in the Swiss city of Zrich.
While being a novelty in the transportation field, the separation of ownership and use has long been familiar in areas like photocopying. The energy utilites are moving in a similar direction, realising that what people want is not a substance like oil or coal, but a service like heat and light. The nature of the car business is changing. It may well be that in the not-too-distant future, what may be offered is a service - mobility - rather than an object with four wheels.
Guenter Hoermandinger
F/77 Compayne Gardens London NW6 3RT, UK
Tel. +44 171 625 6640
guenter@hoermand.demon.co.uk - http://www.venus.co.uk/~guenter
