Car-sharing: Will digital innovation spell the end of the road for ownership?

Let’s be honest, you’d have to have been living under a rock not to notice that car ownership has been in digital innovation flux.

Auto makers and start-ups alike have been churning out digital innovation, trying to come to terms with drivers not wanting to own (or afford) their car outright for some time. From leasing to incredibly long finance terms to the new and seemingly unstoppable rise of ride-hailing services like Uber, people across the country (city dwellers and country folk alike) are prepared to give up their car in the name of affordable and more accessible automotive journeys. 

Car-sharing has been the latest auto industry shake-up in larger metro areas around the world. And it has started making its way over the bridge and into your suburb. Is it the end of the car-ownership road for you?  Let’s investigate.

Bringing the sharing economy into your driveway.

Owning your own car has long represented the ultimate manifestation of free will. However, among Millennials and digital natives living in densely populated areas that perception is changing—car access (and ownership) is becoming the ultimate luxury.

A recent survey from Vancouver, Canada, found that an impressive 87% of car owners surveyed said the cost savings from vehicle maintenance and fuel make it tempting to get rid of their cars. And more than half of them told car-sharing co-op Modo (which asks the question on its homepage “Why own a car when you can share 400?”) that they think car sharing is an attractive option for people their age. It’s fair to assume that the same survey, conducted in your city, would see similar results.

As if they’re planning a drop in future car ownership—several major automakers have invested in car-sharing businesses or even launched their own startups in the space.

Depending on where you live there are some pretty successful car-sharing companies in full swing all around the country. City CarShare, CommunAuto, Community CarShare, Enterprise CarShare, PhillyCarShare, VrtuCar, and Zipcar to name a few. But that model (the neighborhood model—car-sharing vehicles positioned in residential and mixed-use neighborhoods for use by local residents) is just the beginning of the story.

Private car-sharing networks are around the corner and automakers are leading the way.

Vehicle OEMs are increasingly experimenting with alternative models of vehicle ownership as a defensive move, to ensure they stay on the cutting edge how consumers might define ownership in the future.

At the start of the year, General Motors invested $500 million in this disruptive innovation in car service, with its on-demand network of cars aiming to give industry giant Uber a run for its money. And recently, with its Cadillac brand, announce an all out attack on reaching the Millennial (and doing so with as non-traditional approach as it can muster).

BMW Car Sharing

In April 2016, BMW launched a new car-sharing service called ReachNow that will enable Seattle residents to access 400 cars that they can pick up and drop off pretty much wherever they like, as long as it’s dropped off within the town’s perimeter. Eventually, the idea is to expand into cities nationwide.

Meanwhile, Jaguar Land Rover unveiled InMotion, a separate business and “innovation” company charged with building mobility apps and services that play to the strengths of its parent company’s premium car brand.

Car2Go-SmartBMW joins the likes of Daimler, which runs its Car2Go service in New York, Austin, Minneapolis, Vancouver and Portland, Oregon, and Audi, whose car sharing service operates in San Francisco and Miami, in the US car sharing space.

BMW is keen to prove that they’re in it for the long term with ReachNow, partnering up with RideCell, a San Francisco-based company whose software allows BMW to operate its fleet of car-share vehicles more efficiently.

By implementing RideCell’s technology, BMW can see which of its electric vehicles are low on battery, for example, and might offer drivers an incentive to leave the car at a charging station.

audi car sharingBut one of the biggest OEM’s doing the most to test the sharing waters is Audi.  First off,  there’s Audi on demand which has been in market for a few years. Initially targeted for San Francisco, it allows people to rent an Audi for a period of time ranging from one day to 28 days. Via a downloaded iPhone app, people can choose any Audi from an A4 to an R8. Customers can even upgrade to features like child safety seats, ski racks and towing packages. A concierge will deliver the vehicle to the customer’s location with all the premium service you’d expect from Audi as well as a premium price.

And then there’s Audi at Home—a collaborative program based in select condominium complexes where residents will be able to participate in a car sharing service using their smart phones to reserve specific Audi vehicles. Rates will be hourly with prices based on which vehicle is selected. Another pilot program to watch is the one in Berlin, Germany, where Audi is testing the Audi Select program—where a customer experience design feature of this service allows drivers to switch up to three different Audi vehicles each year, for a monthly fee. And finally, Audi has also been piloting Audi Unite in Stockholm – where up to 4 people sign up to participate in a joint lease for a specific vehicle. Similar to calendaring on AirBnB, the mobile app UX lets them schedule when and how long they can use the vehicle.

There’s a lot of disruption being attempted in the category.  But by far, my favorite so far is Flexdrive. A product innovation from Cox Enterprises, who already owns Autotrader, KBB and Manheim brands. Flexdrive is only in a few markets, but the model appears to be one that will stick. With Flexdrive you get a simple and convenient alternative to traditional car ownership. Members get the car of their choice, insurance, maintenance and roadside assistance, and the ability to swap—all in a single payment.

Will car-sharing do to the auto industry what iTunes did to music?

Given North America’s shifting demographics, urban environments, and auto industry dynamics, car-sharing will continue to grow and the impact will expand. Certainly for Millennials, all signs point towards car ownership becoming a thing of the past. A recent study by Boston Consulting Group (BCG) predicts that that car-sharing could have an impact on vehicle sales in the U.S as soon as 2021—predicting the first dent to car ownership to be roughly 550,000 vehicles worldwide.

From a utilitarian perspective this makes a ton of sense. The benefits of the access and use of a car without the hassle and expense of maintenance is hard to argue against. This will prove out to be a major hurdle the auto industry will have to get over long-term. Car-sharing can substantially reduce the number of vehicles owned by member households. A recent study of 6,281 households in car-sharing organizations that use the “neighborhood” business model found households joining car-sharing owned an average of 0.47 vehicles per household before joining car-sharing, but that average dropped to 0.24 after membership.

As car-sharing networks grow and become more established, their attractiveness to vehicle-owning households will increase, even in lower-density communities, such as the suburbs.

But to win Millennial hearts automakers will need to bring more than utility—by exploring every angle of the car-less lifestyle.

While car-sharing hasn’t won everyone just yet, it’s easy to see how our Millennial Generation has taken the emotional meaning many place on the car, and transferred it to the smartphone. And with that emotional adjustment, I believe, comes opportunity. Just as every single automaker has a brand that represents a specific lifestyle, so does the smartphone. Our devices, and as importantly, the types of services and communities they give us access to are inextricably bound to where we want to go and how we want to get there. Ultimately what we do—for a living and for fun— are quite literally our lifestyle. (Sound familiar?)

Automakers struggling to drive commercial value with Millennial Hearts need to look no further than the community, ubiquity and access of the smartphone for their answers. These car companies are going to have find their roots as technology and service companies as much as they are product companies. That includes logos that are designed for digital, slogans and services that apply to more than just the PHYSICAL product, and more.

If the lifestyle the smartphone represents (access) collided with the lifestyle individual car brands (and often times individual Models) emote, can utility become necessity and even luxury?

The answer is yes. And for car-companies trying to remain relevant, the time is now.