Car sharing has gained a significant presence in cities worldwide and has continued to receive media attention. Car-sharing is continually replacing the old-fashioned ownership model, and most automotive OEMs are gearing up to become mobility providers rather than selling vehicles.
A World Of Change?
Multiple socioeconomic trends aid the car-sharing business model.
- Governments are continually taking actions to reduce emissions and increase sustainability by changing mobility-related policies.
- Digital technology is becoming part of our day-to-day lives, ranging from using services and products to organizing our mobility.
Such trends have fueled car-sharing offerings, and the business model has continued to spark enthusiastic hopes for OEMs, policymakers, and mobility players.
Parameters Of Car-Sharing Business Model
The in-depth analysis helps demonstrate to what extent the car-sharing service allows shape mobility and ways it will become financially successful in years to come.
Customer Perspective
The number of individual car-sharing demand is increasing, and providers have announced that there are 27 million clients globally. Surveys are continually being done to investigate service satisfaction, customer motivation, and potential improvement.
What Drives Car-Sharing Members To Become Satisfied And Loyal Clients? Favorable economics is the reason behind loyalty and members’ satisfaction, with most customers quoting good value for money and price transparency.
Favorable economics is the primary motivator for younger non-members and older members to consider car-sharing. The model offers specific models and brands of high relevance for older non-members and younger members.
Car Sharing Economics
From an economic perspective, there is the need to consider various costs for operating cars in cities and the generated revenue from time-based rentals. The number of revenue-generating users and the number of vehicles on the cost side is dependent on various parameters of the region or city where the car-sharing provider operates.
Revenue And Operating Costs
Based on reports, the critical customer criterion for considering mobility in car sharing is finding a car within less than one kilometer. A minimum number of vehicles is thus required to operate within a given city to fulfill the condition, assuming such cars are distributed equally in the area of operation.
Factors influencing revenue and cost of a car-sharing provider
- Car fleet: OEMs’ car-sharing services benefit more from more significant discounts on the initial price than independent providers. Smaller cars have lower depreciation, lower fuel costs, and minimal maintenance costs.
- Operating model: Free-floating car-sharing services have additional costs for relocating vehicles. They also tend to incur extra charges for advanced hardware, including internet connectivity and equipment for unlocking the car with a smartphone.
The Effect Of Population Density
Population density impacts car-sharing profitability significantly in any given city. Cities with high population densities have a more significant number of users per hour and car, increasing revenue.
Even though the total city population size and mean population density are indicators of car-sharing success, looking at the city’s detailed population is essential as car use is achieved in hot-spot areas. The operator can afford a high density of cars, which facilitates short distances to the next available vehicle, making car-sharing a convenient option.
Secondary Effects Of OEMs
Car sharing is a strategic financial investment, and OEMs can generate secondary effects to balance financial losses caused by their services if the fleet is insufficient to break even.
Brand Image
According to an expert from companies like Avail, car sharing is the most frequently discussed topic regarding automotive business models. Getting involved with the proprietary service directly impacts the OEM’s brand image in the perception of the OEM’s progressiveness and OEM’s sustainability.
The fundamental pillar of the car-sharing economy is sustainability, as sharing assets results in less resource consumption. When two individuals share a single car, less energy and raw materials are consumed for assembly and production.
Customer Relationships Management
Car sharing offers OEMs the opportunity to make their products known to a broader audience more cost-effectively. The approach allows OEMs to establish relationships earlier in the client life cycle, which influences brand loyalty and increases the possibility of brand interactions beyond the car-sharing service.
Providers have to increase their network density for clients to boost usage and make the service more convenient. Rapidly growing metropolitan areas combined with higher population density are continually changing the business model in these markets.