Who needs to own a car?

Ride-shar­ing forces auto in­dus­try to re­think its mar­ket­ing

Los Angeles Times - - FRONT PAGE - By Jerry Hirsch

For at least 22 hours a day most cars sit parked, suck­ing up their own­ers’ money while wait­ing to be driven. For most peo­ple, it’s one of their most un­der­uti­lized — but most ex­pen­sive — as­sets.

Now, some com­pa­nies are de­vis­ing ways to help peo­ple profit from their ve­hi­cles. Start-ups like Re­layRides and Ge­taround help peo­ple rent out their cars dur­ing down time. Uber, Lyft and Side­car con­nect car own­ers with peo­ple will­ing to pay for a ride. The rapid growth of these start-ups is trans­form­ing trans­porta­tion — mak­ing it eas­ier than ever be­fore to get around with­out own­ing a car — and forc­ing au­tomak­ers to de­vise new strate­gies to lure prospec­tive buy­ers.

Last week, Ford launched a car-shar­ing pro­gram that of­fers buy­ers a new way to off­set the pains of

own­er­ship by tap­ping into what is es­sen­tially an Airbnb on wheels.

And in Ger­many, Gen­eral Mo­tors launched a CarUnity app that lets own­ers of any brand rent their ve­hi­cles to Face­book friends or peo­ple in the app’s net­work.

“This is a big bang mo­ment for the auto in­dus­try,” said Thilo Koslowski, vice pres­i­dent at re­search firm Gart­ner Inc., who es­ti­mates that by 2025, 20% of the ve­hi­cles in ur­ban cen­ters will be ded­i­cated to shared use.

“Imag­ine all of a sud­den 20% of your ve­hi­cles sales in the clas­sic sense — to in­di­vid­u­als who will be the only user of that car — go away,” he said.

Each ve­hi­cle that goes into a full-time car-shar­ing ser­vice, such as short-time rental com­pany Zipcar, supplants four to six new car sales and post­pones the pur­chase of up to seven more, said Su­san Sha­heen, a trans­porta­tion ex­pert and pro­fes­sor of civil and en­vi­ron­men­tal en­gi­neer­ing at UC Berke­ley.

As peo­ple share ve­hi­cles, cars be­come “less sexy and more just trans­porta­tion tools,” Koslowski said.

The ul­ti­mate ef­fect on car sales is un­clear. Pop­u­la­tion growth and a bur­geon­ing mid­dle class in de­vel­op­ing coun­tries are cre­at­ing new cus­tomers at a steady clip. But sales could take a se­ri­ous hit if peo­ple de­cide it’s cheaper to forgo own­ing a car in fa­vor of rent­ing or rideshar­ing for the oc­ca­sional er­rand.

“This will force the auto in­dus­try to re­think how it mar­kets its prod­ucts,” Koslowski said.

Au­tomak­ers are po­si­tion­ing them­selves to make sure new sources of cash f low their way. Rental pro­grams are a way to in­tro­duce prospec­tive con­sumers to their brand. And if you’re go­ing to rent out a car, why not up­grade to a nicer one?

Mark Fields, chief ex­ec­u­tive of Ford Mo­tor Co., said the au­tomaker needs to start “think­ing like a mo­bil­ity com­pany” as well as a man­u­fac­turer.

In its six-month test pro­gram, Ford’s auto fi­nanc­ing arm is invit­ing cus­tomers in six U.S. cities — Berke­ley; Oak­land; San Fran­cisco; Port­land, Ore.; Chicago; and Washington, D.C. — and Lon­don to sign up to rent out their ve­hi­cles for short­term use.

The San Fran­cisco car- shar­ing com­pany Ge­taround will man­age the pro­gram by screen­ing driv­ers, col­lect­ing funds and pro­vid­ing a $1-mil­lion in­sur­ance pol­icy. Ge­taround sug­gests a rental rate based on the make, model and lo­ca­tion of the ve­hi­cle, but own­ers can set their own prices.

Rates are typ­i­cally $7 to $12 an hour and in­clude cus­tomer sup­port and road­side as­sis­tance. Ge­taround takes a 40% cut.

In Ban­ga­lore, In­dia, Ford is test­ing a frac­tional car own­er­ship pro­gram with the car-shar­ing ven­dor Zoomcar. The com­pa­nies have iden­ti­fied sev­eral three-per­son groups with com­ple­men­tary sched­ules, al­low­ing each pod to share a sin­gle ve­hi­cle.

For some own­ers, the busi­ness can cover their car ex­penses.

Damien Breen, 38, rents his 2015 Audi A3 out 10 to 14 days a month, charg­ing $59 a day through Re­layRides. The Hol­ly­wood busi­ness­man works out of his house and uses ride-share ser­vices Uber and Lyft to get around if the car is out.

“It pays for 100% of the ex­pense of my leased ve­hi­cle, in­clud­ing in­sur­ance, mak­ing it a free car for me to use two weeks a month,” Breen said.

Hay­ley Ort­ner, 26, makes about $300 a month through Ge­taround rent­ing her 2015 Ford Fi­esta for $9 an hour dur­ing the evenings and on week­ends in San Fran­cisco.

That cov­ers the en­tire $276 monthly loan pay­ment on the ve­hi­cle, said Ort­ner, a be­hav­ior ther­a­pist.

Mil­len­ni­als are lead­ing the trend, look­ing for wheels to sup­ple­ment an oth­er­wise car-free lifestyle, re­searchers say.

“Peo­ple be­low the age of 30 are much more likely to iden­tify with their mo­bile and com­put­ing de­vices than the cars,” said Arun Sun­darara­jan, a pro­fes­sor of in­for­ma­tion, oper­a­tions and man­age­ment sciences at New York Univer­sity. “Autos just aren’t the iden­tity-mak­ing pur­chase that they once were.”

More than half of mil­len­ni­als re­port be­ing open to shar­ing rides with oth­ers and rank car rides sec­ond only to book lend­ing as things they are most open to shar­ing, ac­cord­ing to a study from the Penn Schoen Ber­land re­search firm.

Though au­tomak­ers be­lieve in­di­vid­ual con­sumers will re­main the pri­mary sources of their busi­ness well into the fu­ture, they are hedg­ing their bets.

BMW plans to of­fer an op­tional equip­ment pack­age for cars from its Mini brand that will al­low own­ers to share their ve­hi­cles. The com­pany hasn’t de­tailed the tech­nol­ogy, but it will prob­a­bly give renters ac­cess to un­lock and drive the cars through a smart­phone app or other de­vice.

“So­ci­ety and the automotive in­dus­try are un­der­go­ing rad­i­cal change,” said Peter Sch­warzen­bauer, who heads BMW’s Mini and Roll­sRoyce brands. “So it makes sense for us to of­fer a car­shar­ing op­tion for Mini start­ing in 2016.”

Bob Carter, who heads Toy­ota’s sales in the U.S., says the com­pany is gaug­ing how car- and ride-shar­ing com­pa­nies such as Uber will af­fect their busi­ness. In San Fran­cisco, for ex­am­ple, “we will see busi­ness mod­els de­velop around ac­cess to cars but not own­er­ship,” he said.

Yet in other ar­eas, in­clud­ing sprawl­ing South­ern Cal­i­for­nia with its long com­mutes and de­cen­tral­ized em­ploy­ment, ve­hi­cle own­er­ship will con­tinue to drive the auto busi­ness, Carter said.

Many in the auto in­dus­try are skep­ti­cal that Amer­i­cans are go­ing to fully em­brace ditch­ing their wheels and start sub­scrib­ing to car­shar­ing ser­vices any­time in the near fu­ture.

“I be­lieve that the Amer­i­can love af­fair with cars is alive and well,” said Scott Pain­ter, chief ex­ec­u­tive of TrueCar, the online dig­i­tal car pric­ing ser­vice. “I think we can grow the pie. I don’t think we will see a de­cline” in car sales.

One thing is cer­tain: The com­pe­ti­tion will be fierce.

Sha­heen, the UC Berke­ley pro­fes­sor, said there are 23 car-shar­ing com­pa­nies rent­ing 19,115 ve­hi­cles to ser­vice about 1.3 mil­lion mem­bers in the U.S. The in­dus­try is grow­ing at about 35% an­nu­ally, she said. Her data in­clude only com­pa­nies such as Zipcar, which owns its fleet and rents cars by the hour.

Other com­pa­nies such as Ge­taround, Re­layRides and FlightCar al­low peo­ple who own their own cars to make peer-to-peer rentals. Although there is over­lap, each of the com­pa­nies tar­gets a slightly dif­fer­ent mar­ket.

Re­layRides, for ex­am­ple, re­quires a min­i­mum full-day rental. FlightCar is air­port­based. When peo­ple em­bark on a trip, they leave their car at the air­port to be rented by a trav­eler to that city. Ge­taround is gen­er­ally used for hourly ac­cess to ve­hi­cles.

But all have a com­mon goal.

“Our mis­sion as a com­pany is to make cars less idle,” said An­dre Had­dad, chief ex­ec­u­tive of Re­layRides.

Luis Sinco Los An­ge­les Times

DAMIEN BREEN rents out his 2015 Audi A3 10 to 14 days a month, charg­ing $59 a day through Re­layRides.

Luis Sinco Los An­ge­les Times

DAMIEN BREEN uses ride-share ser­vices Uber and Lyft to get around if his Audi is be­ing rented.

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