Car sharing to be worth €4.7 billion in 2021
Car sharing will gain in popularity by 2021, attracting 35 million users and generating annual global revenues of €4.7 billion. The sharing economy service will be most popular in Europe, followed by Asia Pacific and North America. While car sharing fleet sales will offset some private sales losses, BCG predicts that manufacturers will lose about 550,000 net unit sales by 2021.
The sharing economy is a big disruptor, with ride sharing apps like Uber and home-sharing apps like Airbnb shaking up the taxi and hotel industries. People can now rent anything from boats to handbags with that great enabler of disruption – the app-equipped smartphone.
Car sharing – or the renting of cars for short periods of time – is becoming increasingly popular, especially with younger, more urban consumers who are less likely to own a personal vehicle. Car sharing is an attractive value for young urbanites who need cars infrequently and for short trips – since they can avoid the high total costs of car ownership (purchase, insurance, maintenance) and only pay for a car when they need it.
In a report from management consultancy The Boston Consulting Group (BCG), the firm finds that though car sharing will expand quickly by 2021, the effect on new car sales will be muted – as many drivers will continue to purchase new vehicles, while lost sales will be partly offset by new sales into car sharing fleets in large cities.
Car sharing has taken hold in large urban centres in both the developing and developed world. Though Asia Pacific has the largest market with 2.3 million users and 33,000 vehicles, Europe has the most per capita, with 2.1 million users and 31,000 vehicles. North America brings up the rear with 1.5 million users and 22,000 vehicles. Together, the regions had 2.5 billion booked minutes in 2015 and €650 million in revenues.
BCG expects an ‘evolution scenario’ in car sharing by 2021, wherein the service will accelerate in adoption by 2021, while private ownership retains its social importance. New car sales will take a modest hit, but the number of converted private owners will move at a manageable pace. Consumers that buy into car sharing will have to be persuaded by value and coverage – primarily meaning they drive under a certain amount and are located in larger urban centres.
Car sharing holds the greatest value for drivers who have low annual mileage, since they derive greater value from avoiding the high fixed costs of insurance, maintenance, and depreciation. The car-sharer would pay only the time-based fee when using the vehicle, though that rate would be higher per trip that the use of a personal car.
In Europe, city-car drivers driving less than 7,500 km per year would see a cost advantage in car sharing. Drivers of compact cars who travel less than 12,500 km would save money by using car sharing; for mid-size cars – under 16,000 km; for large cars – under 24,500 km per year. Based on this analysis, 17% of city-car drivers, 46% of compact car driver, and the majority of midsize and large-car drivers in Europe would incur a lower cost of ownership by switching to car sharing.
Car sharing services also need a critical population mass in order to be profitable, which means a city population of at 500,000 in North America and Europe, and 5 million or more in Asia Pacific. What this means is that for many parts of the US, including most of the Midwest, car sharing is not a very viable option – where people in sparsely populated areas drive large distances annually.
In BCG’s projection, car sharing will decrease annual purchases of cars by 792,000 vehicles globally by 2021 – a little over 1% of expected sales (78.4 million new cars) in markets where car sharing is available.
Asia Pacific will see sales shrink by 462,000 (1.2% of sales in 2021), while Europe will see a new car sales decline of 278,000 (1.3%) and US sales will shrink by a much smaller 52,000 (0.3%). Regional trends obviously impact the likely uptake of car sharing. In Europe, government discouragement of driving in city centres disincentivises car ownership, while the density of population centres and the availability of strong public transit and biking infrastructure further reduces the need for car ownership. China is also trying to limit ownership because of problems with smog and congestion, by hiking the cost of license plates.
The US, where the sprawling Midwest lacks large population centres and residents drive large distances, is a different case. The total cost of ownership of cars is also lower, with cheaper gas prices and lower taxes on vehicles. For large parts of the US, car sharing is a no-go because of a lack of population density and large distances covered by drivers annually. In dense cities like New York, Boston, and San Francisco, however, car-sharing is a more viable option, though less regulatory restrictiveness and a cheaper cost of ownership means that many will still a buy a personal car, even there.
According to the report, urban population and the number of licensed drivers will determine the growth of car sharing in Europe, North America, and Asia Pacific. In Europe, 81 million people will live in large urban centers in 2021, with 46 million having a driver’s license and 14 million registering with a car sharing service. In Asia Pacific, the urban population will reach 253 million in 2021, with 75 million licensed drivers and 15 million registered car sharing users. In North America, BCG projects 50 million in large urban centres, with 31 million licensed, and 6 million registered car sharing users.
The report predicts that that revenues of car sharing services will reach €4.7 billion in 2021 globally, with the bulk of revenues (€3.2 billion) coming from light users going on occasional trips. Europe will be the largest user, with revenues of €2.1 billion, followed by Asia Pacific with €1.5 billion, and North America with €1.1 billion.
Some of the lost sales of cars will be offset by the purchases of car sharing fleets, with BCG estimating fleet sales equalling about one-third of lost private new car sales. In Europe, car manufacturer will lose 278,000 private sales but gain 96,000 fleet sales; in Asia Pacific – 462,000 forgone private sales but 106,000 fleet sales; and in the US – 52,000 lost private sales and 44,000 fleet sales. In total, manufacturers will lose about 550,000 unit sales worldwide, working out to approximately €7.4 billion in lost revenue. The losses will be miniscule in the US, and highest in Asia Pacific.
Looking to the future, the integration of automated vehicles into car sharing has the potential to make the service even more attractive. Though not likely to affect large scale mobility patterns until the end of the 2020s, AVs’ low operating costs and ability to be where users need them to be will effectively merge car sharing with ride sharing. AVs’ low operating costs will also allow the services to enter smaller cities, boosting usage. The added convenience of automated vehicles also has the potential attract new registered users for car sharing services.
