01_18 Increasing importance of car sharing services as stimulus for electromobility development

Car sharing is an example of the sharing economy. It consists in shared, organised use of a car without the necessity to own it. The mechanism behind the functioning of this model, sometimes referred to as cars “by the minute”, is very simple. Using a free mobile application or an operator’s website, the user registers in the system in several simple steps. Then they select and book the nearest car available in the app. Once they find the car, the user checks the vehicle’s technical state and opens the door, again using the mobile application. The car is also returned via smartphone. Having arrived at their destination, the driver receives an e-mail containing information about the distance covered, the time of travel and the fees that are collected automatically from the user’s payment card. Users pay for the kilometres and the time of travel. The costs of fuel, insurance, service, repair, car wash and parking in paid zones are included in the price of transfer, therefore the user does not bear any supplementary costs.

Car sharing can be organised along several models. The most popular is the free-floating system, where the cars may be collected and returned in any place within the territorial scope of the service. The remaining models are the stationary model, where the customer collects and returns the car to one of the operator’s bases, and the P2P system consisting in renting private cars.

Why is car sharing a better alternative to privately owned cars and why is it becoming increasingly popular?

The most important factors favouring the use of car sharing services as a means of transport include:

1. High ownership cost of privately owned cars.According to PwC’s estimates, the yearly total cost of ownership (TCO) of a medium class car in Poland, taking into account the loss of value, fuel for 15 thousand km, service and insurance costs, amounts to approx. PLN 15 thousand.
2. Substitutability of the car sharing service not only with regard to privately owned cars but also to taxis and public transport. On a comparable distance, the average taxi fare is nearly two times higher than a journey made within the car sharing service. On small distances, the cost of a journey in a car “by the minute” is only slightly higher than the cost of urban transport, therefore many persons decide to choose the “door-to-door” transfer guaranteeing high comfort and saving time.
3. Higher environmental awareness of the society.According to different estimates, one shared vehicle may replace 7 up to 11 private cars, which results from the fact that a private car is used one hour a day, while a vehicle in the car sharing system works for up to even 10 hours a day. In many cities, car transport is the main source of pollution, therefore reduction of the number of cars in cities hugely contributes to air quality improvement. Reduction of the number of cars will also lead to a lower demand for parking spaces and, indirectly, reduction of traffic congestion.

Car sharing in Europe

The concept of car sharing appeared in Switzerland and the Netherlands already several dozen years ago, but it gained popularity due to wide-spread internet and quick development of mobile devices only in the second decade of the 21^st century. Currently, Europe, with its 6 million users and 70,000 cars, owns approx. 50% of the car sharing market. The country where the car sharing has developed the most is Germany, where such systems operate in 597 cities and communes, and the number of system users has exceeded 1.7 million[1].

It is estimated that within the next several years the European market will experience average yearly growth of up to 30%.

Car sharing in Poland

Car sharing in Poland started to develop in the second half of 2016 together with the launch of Traficar (Krakow) and 4Mobility (Warsaw) systems. At the end of 2016, the car sharing systems offered a total of 300 vehicles. 2017 was a breakthrough year for car sharing in Poland, as the use of available cars was increasing together with growing awareness of city dwellers, which encouraged the current operators to enlarge their fleets and new actors to enter the market.

Currently, in 9 Polish cities there are nearly 2,000 cars available “by the minute”. However, this number will undoubtedly grow in the upcoming months as fleet operators plan their expansion to new cities. The leader in terms of the number of vehicles is Traficar, operating in Krakow, Warsaw, Wrocław, Poznań and the Tricity area. Other operators are Panek (Warsaw), 4Mobility (Warsaw) and Vozilla (Wrocław). All operators offer their services in the free-floating system, and 4Mobility also in the stationary system. An interesting model was introduced by the Wrocław-based Vozillla, offering electric cars, whereas its competitors use conventional or hybrid vehicles. Except for the Wrocław system, ensuring dedicated parking spaces and the right for drivers to use bus lanes, the authorities of other cities did not propose any additional incentives.

What is the future of car sharing?

According to PwC’s analyses presented in the report entitled “The five dimensions of automotive transformation” during the IAA Frankfurt 2017 Trade Fair, already in 2030 every third kilometre covered in Europe will be covered within a shared model of some sort[2]. The forecast provided is reflected in the activities of car manufacturers who, expecting lower volumes of cars sold to private owners in the future, invest in car sharing solutions. The Car2Go company, owned by Daimler, is the largest car sharing operator in the world, operating in 8 countries and having a base of 3 million users. Among the remaining car manufacturers, the largest car sharing projects are being developed by BMW (DriveNow, ReachNow), PSA (Koolicar, Emov), Audi, Nissan, Volkswagen, GEELY and Ford.

The development of electromobility is closely related to the car sharing service. Using electric cars, the car manufacturers not only test and promote their new models, but also familiarise potential buyers with the new technology. Furthermore, in several European cities only electric cars are allowed into city centres, which makes car sharing of electric vehicles even more attractive to users. Unfortunately, due to the very high prices of new electric vehicles, the operation of systems based on electric cars is in many cases permanently unprofitable (e.g. the French Autolib’ has not been generating profits for the last 6 years). However, PwC’s forecasts indicate that the prices of batteries will gradually decrease, thus reducing the TCO for electric cars.

The history of breakthrough innovations and their impact on the economy quotes numerous examples of enterprises that did not see the wind of technological changes coming. This usually resulted in spectacular failures.

Electromobility and car sharing are today’s innovative foundations of the future motor industry. Entrepreneurs will have to take into account the impact of these modern trends and their related opportunities and risks on their strategies.

[1] https://carsharing.de/sites/default/files/uploads/pm_carsharing-bilanz_2017_english_version.pdf

[2] https://www.pwc.de/en/presse/press-releases/2017/by-2030-the-transport-sector-in-europe-will-require-80-million-fewer-cars-than-today.html