SHARING IS CARING
Auto companies look to startups offering AirBnB-like services for cars as a way to upsell, reach new customers,
NEW YORK— The ability to rent his car to strangers for cash convinced Trevor Davis, a high school teacher in Dallas, to buy a brand-new Honda Civic instead of a used car. “I was going to get something real cheap, an inexpensive second car to drive back to the Fort Hood area,” said the retired Army veteran, who makes the 150-mile trip frequently. “But then I was like, ‘I can get a better car and not really pay for it.’ ”
This is the logic behind Airbnb-like services for autos that are catching on as new-car prices soar, borrowing costs rise to the highest in a decade and consumers take out longerterm loans to keep payments down.
Startups like Turo Inc. and Getaround Inc. are helping car owners lower their transportation costs in ways analogous to how Airbnb Inc. enables real estate owners to defray housing expenses, using peer-to-peer rental transactions.
Car-sharing startups are beginning to look more like sales tools than mortal threats to traditional car ownership that automakers ought to be worried about. Fiat Chrysler Automobiles NV and Volkswagen AG’s Porsche are both experimenting with Turo to see if they can upsell customers or reach new buyers, while General Motors Co. rolled out a service last summer to let owners of its cars rent them out.
Buying a new car is “no longer this freedom-only, sort of carefree-type of purchase that some people may have enjoyed over the last few decades,” Andre Haddad, Turo’s chief executive officer, said in an interview. “For more and more people, this is a mathematical problem that they need to solve.”
The arithmetic is working out in Davis’ favour. His 2019 Honda Civic costs about $428 (U.S.) a month, including insurance. In the first month he put the car on Turo, Davis said he earned $437 renting it out for about three weeks.
Just 10 per cent to 15 per cent of the roughly 350,000 cars listed on Turo are new, Haddad said, and the average vehicle is three to four years old. About 60 per cent of owners who put their car on the platform use the proceeds to pay down a car loan and more than half use it to cover primary expenses or add to their savings, according to an internal survey of 3,900 Turo users last summer.
A 2018 study by Susan Shaheen at the University of California, Berkeley found that most people who joined peerto-peer car-sharing services were not replacing a vehicle, and nearly half were looking for alternative transportation because they didn’t own a car. Another 20 per cent joined to earn money by sharing their wheels.
“We are becoming increasingly convinced that the pool of buyers who can afford new vehicles is shrinking,” said Michelle Krebs, a senior analyst at Autotrader. “It will be affordability that pushes people to consider mobility services, whether it will be peer-to-peer car sharing, or more Uber or Lyft kinds of things.”
Turo, founded in 2009, has raised $205 million from investors including Daimler AG, the venture capital arm of Liberty Mutual Insurance Co., and venture capital firm Kleiner Perkins. The company was valued at about $760 million at the closing of its last funding round in March 2018, according to the Prime Unicorn Index, which tracks the performance of 116 private U.S. companies valued at $500 million or more.
Getaround, its fellow San Francisco-based rival, counts Japanese internet giant SoftBank Group Corp. and Toyota Motor Corp. among its backers. The company was valued at more than $800 million in its funding round last August, a source familiar with the discussions said at the time.
Turning your car into an extra income stream is coming in handy at a time when affordability is straining new-car sales. The annualized industry sales rate slowed to 16.6 million in February, the slowest pace in 18 months. Auto lenders have been tightening credit, and the number of people delinquent on their loans swelled to a record of more than seven million last year.