Insights

Sharing is caring

Business Development Manager - SE
Valtech

July 05, 2016

– the sharing economy in general and car sharing in particular.

It’s Tuesday and the time is 8:15 a.m. Time to head to work. A trip normally made by bike. But today the rain is coming down in buckets. I grab my phone, open my DriveNow app and see if there are any free cars nearby. There are four cars available in a three-block radius. Three Minis and a BMW. While walking toward Hedinsgatan where the car "Stan" (a Mini) is parked, I book it with a single click.

Once I’m there I unlock the car using the app, jump in, enter my PIN and answer a few simple questions about the condition of the car (cleanliness, etc.). Then all I have to do is press the start button and drive to work. Once I arrive at work, I simply park, log out and boom, now the car is free again and available for someone else in the area to book and use.

A new era for underutilised assets

The market for sharing our underutilised assets is growing quickly. Think cars, summer homes, tools, etc. New business models are challenging established ones, and more and more people are seeing the value and the opportunity inherent in the sharing economy.

The sharing economy has a positive effect on society. By sharing our resources we reduce our environmental impact, and by sharing costs we have more money left over. Money that we can then use to finance someone else’s investment, rent a place to stay while on holiday, share cars, etc. Meaning that even as consumption goes down, our ability to consume increases, as we have money left over. A more efficient economy, you could say. But these developments mostly affect products with a low utilisation rate.

The sharing economy also affects society and our systems in general. For example, the value created within the sharing economy is not captured by the traditional GDP measure. Which makes economic activity look weaker than what is actually the case.

Sharing economy

Collaborative economy

An economy based on distributed networks with connected individuals and communities instead of centralised institutions. A model that changes how we are able to produce, consume, finance and teach.

Collaborative consumption

An economic model that is based on sharing, exchanging and renting products and services, and which enables access over ownership. It’s not about inventing what we consume, but the way we consume.

 

Peer economy

A person-to-person marketplace that facilitates exchange and direct trade in products and services, based on trust between peers.

 

An economic model based on the sharing of underutilised assets, things, spaces or skills, in exchange for monetary or non-monetary benefits. Also known as (see fact box):

These models are not really new. We can probably find examples that fit all of these characteristics going way back. Yet what is driving these developments and garnering so much attention for these models is how technology and digitalisation have enabled the emergence of entirely novel services and business models – services and business models that have enhanced accessibility and simplicity, but also the experience itself.

Car sharing – a rapidly growing area

Car sharing is just one example of an area that is growing rapidly, and there is nothing really new about it; rental cars have been around for a long time. The big difference is HOW it works.

What is driving the current growth of this market is of course the technology, where the cars are connected (IoT), and where you as the customer can easily open an account and manage everything using a mobile app (booking, unlocking, keeping track of costs, etc.). That and the fact that the cars are spread out all over town. In order to avoid compromising availability and mobility, you have a maximum of 15 minutes from the time you make a booking until you have to open the car and drive off.

Car makers driving the evolution

As usual, the players that will win are those who understand the evolution. For example, DriveNow is a joint initiative of BMW/Mini and Sixt. These are the kinds of companies that might have seen this trend as a threat. But instead they have jumped onboard and are now driving the evolution themselves. And it is a threat: there are calculations showing that a single car in a car sharing solution can replace 15 cars under traditional ownership.

Other similar services that the car makers are also behind:

The only reason I tested DriveNow was that Car2Go’s cars are too small (room for two), Sunfleet charges a startup fee and a fixed monthly fee, and Audi Unite requires at least two people to join for 12 months. DriveNow and Car2Go are those offering the absolute lowest threshold for those who want to try it out; and they also have the highest availability.

DriveNow – a test

That is why I chose to try out DriveNow. If I were to give a summary of my experience, this is what I would say:

+

  • Low threshold in terms of becoming a customer and trying it out
  • Easy to navigate – intuitive, easy to find things and learn; the app has a good integrated guide on how the service works, where you can park, etc.
  • Attractive interface – I like the map view but it is a big plus that you can choose between map view and list view for those who like list view better
  • Overview – every time you have driven one of their cars, the map gives you a clear summary of costs, where you drove, how far, etc.
  • Support – friendly, answered immediately
  • The car – The service is attractively integrated with the car, and is intuitive and easy to navigate in the car as well.
  • The cars – nice cars, all were clean and well-equipped.

-

  • Unlocking using the app – did not always work, although they give you a card you can use to open the car.
  • Updates – on two occasions it took a very long time for the app to refresh to show that I had finished my journey and left the car. This led to uncertainty as to whether I was still being charged or not, prompting me to call support (which otherwise lies on the plus side of the equation, with quick response and good service).
DriveNow AppAttractive interface - I like the map view

I also took the opportunity to ask others if they had tried out similar services, which led to several interesting discussions. I won’t draw any scientific conclusions from the conversations I had, but one very interesting point is that most people said they think their current car is the last one they will own. This might lead you to believe that they are all young people living in central Stockholm, but that’s not the case.

The common denominator uniting them all is that they work in business development/innovation and are accustomed to looking at trends and drawing conclusions about what is going on. So what happens if the trend is for ever fewer people to own a car, and what happens to car dealers, a fairly expensive and ineffective solution that the car sharing solutions circumvent? Cars are a perfect product to sell online (assuming they will be sold at all) and when it comes to test driving, Volkswagen is already trying out a new concept.

Summary

To sum up, the sharing economy is an interesting development that is very much in its infancy. And DriveNow is a good example of how technology paves the way for a service that makes it accessible, simple and economical for people to meet their transportation needs. But the elephant in the room remains: what happens when cars become self-driving? Will we be allowed to drive in the cities? Computers are safer, but they are also far better at optimising traffic flows. Will we own cars in the future? Probably not! The new platforms will continue to evolve, and self-driving will usher in a new era of transportation.