Navigant Research Blog

Suddenly Popular, Carsharing Services Seek Profits

Lisa Jerram — December 18, 2013

Carsharing, suddenly, is hot.  A slew of media stories has documented the dawning of the era of the shared economy, where consumers feel less need to own things than to have access to them.  Whether this movement is attributed to the recession, smartphones, demographic changes, or Napster, many observers think it promises to transform the automotive industry.  Navigant Research developed its first forecasts for this market this year.  Our report, Carsharing Programs, forecasts that membership in global car sharing programs will reach 12 million, up from around 2.3 million as of 2013.

Annual Revenue from Carsharing Services by Region, World Markets: 2013-2020

 

(Source: Navigant Research)

These programs have unquestionably boomed in the past decade.  According to the Transportation Sustainability Research Center at UC Berkeley, there were 350,000 members of carsharing programs in 2006, so Navigant’s 2013 forecast represents a 31% compound annual growth rate since then.  Automakers and traditional rental car companies have been jumping into the carsharing sector.  The U.S. General Services Administration (GSA), one of the largest fleet operators in the United States, is testing carsharing services as a way to reduce costs.  China is implementing one of the biggest and most ambitious carsharing programs, with a fleet of 100,000 electric cars.  But as appealing as the concept is, and as much as it is in tune with the zeitgeist of collaborative consumption, carsharing still faces some challenges as a business.

Take Zipcar for example.  Even though Zipcar is by far the biggest carsharing company in the world, with around 760,000 members as of 2012 – that is 43% of global membership in 2012 – it has struggled to find profitability.   In 2012, after 12 years in business, Zipcar finally reported net income for an entire fiscal year.  Zipcar was then acquired by Avis, in a move that the two companies expected would help reduce Zipcar’s operational costs and thus improve the bottom line.  Like any merger between a small, nimble startup and a conservative corporate behemoth, this move was fraught with risks.  So far, Zipcar seems to have been able to retain its brand identity a high-tech company with cool cars, which has been critical to its success.

We are likely to keep seeing carsharing companies partner with or be purchased by bigger companies, either traditional rental car companies or automakers, as has happened with BMW and GM.  Carshare companies, though, must search for new revenue opportunities.  One that seems to be gaining traction is selling the company’s expertise in fleet management.  Zipcar is developing fleet management solutions for New York City and Houston.  Switzerland’s Mobility Cooperative launched a subsidiary business intended to exploit its software expertise.  Renault is using the company’s software to operate its some of its Twizy BEV carsharing services.  Another opportunity lies in expanding into new market segments such as government fleets or airports.  Turning a profit will require a delicate balance between exploring these expansion opportunities and maintaining the brand identity of the carsharing company.

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