Here is the fu­ture of car shar­ing, and car­mak­ers should be ter­ri­fied

Moscow’s shar­ing boom shows how quickly con­sumers can aban­don the tra­di­tional car

Business Standard - - IN DEPTH - ILYA KHRENNIKOV 9 FE­BRU­ARY

When Evgeny Barkov owned a car, the 31year-old soft­ware sales­man would of­ten look out of his Moscow win­dow at it with dis­gust. His pos­ses­sion sat un­used more than 90 per cent of time, while suck­ing up money and caus­ing him anx­i­ety that it might break down.

He fi­nally took out a cal­cu­la­tor, added up all the costs and de­ter­mined he was bet­ter off sell­ing his grey Peu­geot and switch­ing com­pletely to car-shar­ing ser­vices such as Yan­dex.Drive, which of­fers cars rang­ing from ba­sic Kia mod­els to flashy Porsches.

“That in­vest­ment brought me noth­ing but trou­ble,” said Barkov as he wound through Moscow’s snowy streets in a white Skoda sedan with a bright yel­low stripe on the side and Yan­dex’s soft­ware on the dash­board con­sole. “Now, I’m just pay­ing for us­ing.”

The ven­ture—set up last year by a lo­cal In­ter­net com­pany—flooded the Rus­sian cap­i­tal with more than 7,000 cars to rent for as lit­tle as 5 rubles (8 cents) per minute, in­clud­ing fuel, main­te­nance and park­ing. That com­pares to 41 cents a minute for Daim­ler AG’s Car2Go in New York and is an of­fer too good to pass up for a grow­ing num­ber of Mus­covites.

Al­most out of nowhere, car-shar­ing in Moscow boomed, with the num­ber of ve­hi­cles more than tripling last year. The city now has the big­gest shared fleet in Europe and the sec­ond-largest in the world. The rapid shift spells trou­ble for au­tomak­ers by pro­vid­ing a blue­print for how a deep-pock­eted tech­nol­ogy player can move quickly to woo con­sumers with al­ter­na­tives to tra­di­tional car own­er­ship.

“We’re ap­proach­ing a point that could flip the en­tire car mar­ket on its head,” said Sh­wetha Suren­der, a London-based an­a­lyst with con­sul­tancy Frost & Sul­li­van. “Car­mak­ers risk be­com­ing mere sup­pli­ers to shared mo­bil­ity ser­vices and los­ing di­rect re­la­tions with cus­tomers. That’s an unattrac­tive propo­si­tion.”

To be sure, au­tomak­ers are seek­ing to head off the risk. Daim­ler and BMW AG merged their car-shar­ing ven­tures to gain greater scale. Volk­swa­gen AG is test­ing its MOIA ride-shar­ing ser­vice in Ham­burg, while Gen­eral Mo­tors Co. has in­vested in Lyft Inc.

They all some­how missed Rus­sia’s big­gest city, with more than 12 mil­lion peo­ple. Daim­ler’s Car2Go, BMW’s DriveNow and Avis Bud­get Group Inc.’s Zip­car are all no-shows, even though its no­to­ri­ously clogged streets—Moscow is ranked as the world’s sec­ond-worst city for traf­fic con­ges­tion—were ripe for dis­rup­tion and au­thor­i­ties were prac­ti­cally beg­ging car-shar­ing com­pa­nies to in­vest.

Paid park­ing was in­tro­duced in the city cen­tre in 2013 and is gen­er­ally booked via app—train­ing res­i­dents to use smart­phone fea­tures for their trans­port needs. A day’s worth of curb­side park­ing could cost about $30, mak­ing it the largest daily ex­pense for many Rus­sian driv­ers. Car-shar­ing providers get dis­counted rates of roughly $400 a year.

Yan­dex took ad­van­tage, swarm­ing Moscow streets last year with ve­hi­cles such as Re­nault Cap­tur crossovers, BMW 5-Se­ries sedans and even Porsche 911 sports cars. Its ag­gres­sive in­vest­ment made it the mar­ket leader ahead of lo­cal ri­vals De­limo­bil and Belka­Car. At the end of 2018, there were 16,500 car-shar­ing ve­hi­cles in the city, and Moscow’s Trans­porta­tion Depart­ment ex­pects the num­ber to rise by 5,000 ve­hi­cles an­nu­ally in the com­ing years. The fleet ex­pan­sion trailed a boom in users as rides more than quadru­pled to 23 mil­lion.

“Rus­sia started car-shar­ing later than other coun­tries, but due to this we were able to de­ploy the lat­est tech­nolo­gies,” said An­ton Ryazanov, head of Yan­dex.Drive, which ex­panded to St. Peters­burg in De­cem­ber. “Now, the Rus­sian mar­ket is taken by lo­cal car­shar­ing firms, and the en­trance of large in­ter­na­tional play­ers is un­likely.”

Yan­dex NV is Rus­sia’s ver­sion of Google and has taken ad­van­tage of its strate­gic po­si­tion at the cen­tre of the dig­i­tal econ­omy to deepen ties with con­sumers through ser­vices rang­ing from shop­ping sites to mu­sic stream­ing. The com­pany be­gan its push into trans­port ser­vices with cab-hail­ing app Yan­dex.Taxi in 2011, now Rus­sia’s largest. It con­trols Uber Tech­nolo­gies Inc.’s busi­ness in the re­gion.

Car-shar­ing is the next step in even­tu­ally of­fer­ing a robo-taxi ser­vice— the goal of Al­pha­bet Inc.’s Waymo. By start­ing with car-shar­ing, Yan­dex gets a pool of cus­tomers that could eas­ily switch from driv­ing the com­pany’s ve­hi­cles to rid­ing in them.

Car-shar­ing is boom­ing in Moscow, with the num­ber of ve­hi­cles more than tripling last year. The city now has the big­gest shared fleet in Europe

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