Published on March 13, 2014
Should You Become A Car Sharing Operator?
Introduction This webinar will answer the following questions Car Sharing Operators (CSO) need to know: • What are the revenues and profitability you can expect? • What are the profitable target markets for car sharing? • What kind of capitalization do you need? • What are the considerations starting either from scratch or from an established car rental business? Copyright Metavera 2014 – All Rights Reserved
• By the end of this webinar, you will know whether being a Car Sharing Operator (CSO) is for you • Presenters have a cumulative 45 years industry experience and have founded or consulted with: • Zipcar, Mint + Non Profits • Hertz, Avis/Budget, Daimler (1-Way), RelayRides Introduction David Brook Julian Espiritu Copyright Metavera 2014 – All Rights Reserved
David Brook David.Brook@team-red.net Copyright Metavera 2014 – All Rights Reserved
• Network of vehicles close to local demand • 24/7 vehicle access • Vehicles rented by the minute, hour or day • Rates include fuel, insurance, parking, maintenance and cleaning • Membership model What Is Car Sharing? Copyright Metavera 2014 – All Rights Reserved
How Car Sharing Functions Member reserves vehicle via web or mobile app Car share system transmits reservation data to the vehicle Member accesses vehicle with mobile app or smart card • Vehicles located at self-service locations • Better customer experience • Renter’s usage automatically billed to their credit card • Lower transaction cost for CSO Technology is the difference! Copyright Metavera 2014 – All Rights Reserved
Round trip • Neighborhood • P2P – peer to peer • College / university campus • Government / corporate fleet • Fleet leasing with telematics One way and point-to-point • Floating parking • Station parking Combination round trip – one way Types Of Car Sharing For profit or non profit business models Copyright Metavera 2014 – All Rights Reserved
Commercial Car Rental Hourly Car Rental Traditional Car Sharing P2P Car Sharing Fractional Ownership Car sharing – Alternative to ownership Differences Between Car Rental And Car Sharing Copyright Metavera 2014 – All Rights Reserved One-Way On-Demand Car Rental – Supplements ownership
• Europe • 1987 — StattAuto (Berlin, Germany) • 1987 — Mobility Carsharing (Switzerland) • North America • 1994 — CommunAuto (Montreal, Quebec, Canada) • 1998 — Carsharing Portland (Portland, Oregon) • 2000 — Flexcar (Seattle) and Zipcar (Boston) • 2009 — Car2Go (Ulm, Germany) • 2010 — Car2Go (Austin, Texas) • 2014 — Car2Go Black – car rental linked to car sharing • Asia • 1997 — NTUC Car Cooperative (Singapore) • 2002 — Orix (Japan) • 2003 — GoGet (Sydney, Australia) • 2013 — Zoom (Bangalore, India) History Of Car Sharing Copyright Metavera 2014 – All Rights Reserved
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2006 2008 2010 2012 Australia Asia Europe North America Worldwide Worldwide Growth Of Car Sharing Source: Susan Shaheen, Transportation Sustainability Research Center, University of California, Berkeley Copyright Metavera 2014 – All Rights Reserved Members 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2006 2008 2010 2012 Australia Asia Europe North America Worldwide Vehicles Australia Asia Europe North America Worldwide 2006 2008 2010 2012 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2006 2008 2010 2012 800,000 600,000 400,000 200,000 0
• People are moving to cities • 70% of U.S. population • Better transportation alternatives • Bicycles, walking • Uber, Lyft, rideshare • People are driving less • Peak miles in 2005 • Peak car ownership Trends Favoring Car Sharing Copyright Metavera 2014 – All Rights Reserved Source: Michael Sivak, University of Michigan, Transportation Research Institute
Smartphones & apps Trends Favoring Car Sharing Copyright Metavera 2014 – All Rights Reserved
• “Millennials” age 16-34 not as interested in driving • VMT dropped 23% • Getting driver’s license later • Greater indebtedness • Poorer job prospects • Value convenience, flexibility • “Sharing economy” Trends Favoring Car Sharing Copyright Metavera 2014 – All Rights Reserved
• New transportation alternatives • Uber, Lyft (alt. taxis) • Bike sharing • Dynamic ridesharing • Autonomous vehicles Trends Favoring Car Sharing Copyright Metavera 2014 – All Rights Reserved
• Users save • Savings of $2,500 - $5,000 per year compared to ownership • Less hassle • Cities are interested in car sharing • Each shared vehicle offsets 9 – 13 private cars • 26% of car share members sold their personal vehicles • 53% avoided purchasing another vehicle • Reduces member VMT by 20+% (energy & GHG savings) • Investors are interested in new transportation services Trends Favoring Car Sharing Copyright Metavera 2014 – All Rights Reserved
Copyright Metavera 2014 – All Rights Reserved • Car rental companies entering the car sharing market • OEMs (car manufacturers) entering the car sharing market Trends Favoring Car Sharing
Key Customers For Car Sharing • Demographics • Prime customer age 21 – 45 • College educated + • Males and females evenly split • Medium level income • Lower rates of car ownership • Use public transportation • Geographics • Located in urban residential-retail areas • Walkable destinations • College and corporate campuses Copyright Metavera 2014 – All Rights Reserved
Growth Forecast • Frost and Sullivan — 2012 • North America “Optimistic” 2020 scenario • U.S.: up to 7 million members and 155,000 vehicles • Canada: up to 1.4 million members and 31,000 vehicles • Growth Projections for North America • Traditional car sharing = +30% per year • One-way / On-demand = +48% per year • Peer to peer = +34% per year • “10 million people are within a 10 minute walk of existing Zipcars” — Scott Griffith, Zipcar CEO 2012 Copyright Metavera 2014 – All Rights Reserved
Julian Espiritu email@example.com Copyright Metavera 2014 – All Rights Reserved
Car Sharing Compared To Car Rental Car Sharing Car Rental Basic Proposition Alternative to car ownership or people who don’t own a car For business trips, vacations, or insurance replacement Customers Urban dwellers and commuters; campus students and faculty Corporate and leisure travelers; service replacement vehicles (loaners) Usage Model Membership / social driven Transactional Car Locations Private / public parking locations Airports and rental locations Access to Vehicles 24/7 self service via wireless & GPS technology with the use of smart card and smart phones Traditional retail location and counters Pricing All inclusive pricing with insurance and gas included for the first 250 kil. Gas and insurance are optional – up sold separately Reservation Duration By the hour or by the day By the day, week, or month Copyright Metavera 2014 – All Rights Reserved
Consumer Value Proposition Source: Zipcar (http://www.zipcar.com/sf/rates/savings-compare-own) • Alternative to car ownership • All inclusive program • Includes gas • Includes insurance • Includes maintenance • Includes parking • Pay only for what you use Car Owner Car Share Member Car payment $288 included Finance charges $67 included Insurance $84 included Gas $100 included License, registration & tax $49 included Maintenance $44 included Parking $175 included Total: $807/mo *Monthly cost based on small – mid-size car $149/mo avg *A couple trips each week (6 two hour trips & 2 four- hour trips) Copyright Metavera 2014 – All Rights Reserved
Car Sharing Economics • Vehicles rented an average of 6 – 8 hours per day • Renters drive 5 – 7 miles per rented hour • Average utilization is 35% – 45% for a 24 hour period • Average monthly RPU is $1,500 – $1,700 Car Share Vehicle Example Hours per reservation Revenue per reservation Revenue per vehicle per day Average utilization Average revenue per vehicle (RPU) 8.14 $45.78 $56.35 41.8% $1,691 Copyright Metavera 2014 – All Rights Reserved
• Basic • Application fee • Annual membership fee • Pay as you go • Monthly drive plans • Application fee • Monthly driving plans • $50 / $75 / $150 • Plans may include roll over for unused driving dollars (similar to cellular plans) • Car share rates • By the minute • By the hour • By the day • CSO Revenue • 24 hours • Hourly transaction • Multiple reservations Car Sharing Pricing Models Copyright Metavera 2014 – All Rights Reserved
The Future Of Car Sharing Europe $3 Billion + Asia $4 Billion + North America $3 Billion + Copyright Metavera 2014 – All Rights Reserved
Industry Trends In Car Sharing Are Compelling • Continued membership growth and early adoption by young people everywhere • Significant merger and acquisition activity • Ongoing expansion by traditional car rental companies, automakers (OEMs), and muti-national operators into car share • Development of new apps for car sharing including; peer-to-peer (P2P), one-way, and dynamic ridesharing and transportation networks with cross marketing opportunities • Improvements in hardware telematics systems and software provides safety and consumer data Copyright Metavera 2014 – All Rights Reserved
Financial Requirements To Become A CSO Like any other business venture, there is a financial investment and commitment in launching a car sharing organization At a minimum you will need the following: • Vehicles – fleet financing • Insurance • Car share technology platform – Metavera • Expertise – guide you through the process • Website development – brand development • Sales and marketing • Customer service • G&A (general and administrative expenses) Copyright Metavera 2014 – All Rights Reserved
Is Car Sharing A Business for You? • Growth potential • Scalable and relatively minimal start-up cost • Compliment to existing car rental operations • Recognizable brand • Existing customer base • Sustainable demand growth • Young and unsaturated competitive field • Existing infrastructure and back office • Fully automated 24/7 self-service operation (no rental counter or location) • High utilization and RPU • Emerging applications and business models Copyright Metavera 2014 – All Rights Reserved
Tony Simopoulos Copyright Metavera 2014 – All Rights Reserved
• Try to figure it out on your own • Takes a long time, you’ll waste money learning the basics • The market move is now • Attend our upcoming webinar series • Research and develop a fundable plan to become a CSO • Process to effectively deploy as a CSO • Hire the consultants for 1-on-1 guidance • Dave Brook, team red US David.Brook@team-red.net @carsharing_us • Julian Espiritu, Abrams Carsharing Advisors firstname.lastname@example.org Next Steps Copyright Metavera 2014 – All Rights Reserved
Q&A Copyright Metavera 2014 – All Rights Reserved David Brook David.Brook@team-red.net Julian Espiritu email@example.com Tony Simopoulos
Q&A Copyright Metavera 2014 – All Rights Reserved How many vehicles is an optimal number for each parking location? Each parking location should have a minimum of two vehicles. This gives you a level of redundancy when one vehicle isn’t available, regardless of whether the unavailability is known (vehicle has been reserved) or unknown (vehicle is returned late from an earlier reservation). When you have reached an average daily utilization of 8 hours per vehicle and you have a ratio of 45 – 50 members per vehicle, you should either add another vehicle to that location or establish another nearby location to add additional vehicles. The minimum most companies use to decide whether to keep a vehicle at a location is approximately 6 hours per day. Above 12 hours per day you start to run into issues of vehicle availability. It’s always important to add vehicles to popular areas. Failure to do so will prevent members in that area from being able to reserve a vehicle when they need it. A vehicle that is too high in demand (with no availability) is the same as no vehicle to many of your members since they are unable to successfully reserve it. Does Metavera’s technology allow a CSO to look at the profitability and revenue for each individual vehicle? Yes it does. Metavera’s Autovera Platform tracks and reports the metrics for individual vehicles, for types of vehicles and for locations. You can use each of these to manage your business and have the data you need to be successful.
Q&A Copyright Metavera 2014 – All Rights Reserved In the presentation it was stated that a CSO needs, on average, 45 members per vehicle to be successful. Is there a method to determine how many people within a certain walk-able distance are necessary to achieve a successful utilization rate for a vehicle? Market research is key in determining which areas are conducive to car sharing. Factors you look for are population density, income levels, ages, education (college graduates), car ownership, licensed drivers, younger professionals vs. family oriented, parking availability (including issues such as street cleaning hassles and tickets) and public transit choices. Once you have your market research data analysis, you want to place your vehicles within a 5 – 7 minute walking time of your target members. A ratio of 45 members per vehicle is a solid goal, but depending on your company’s mission, ratios lower and higher than 45 are successful. What keeps a car sharing business successful is convenience and accessibility for its members. Each city, down to the neighborhood level, will differ depending on factors such as what percentage of members do not own a vehicle as compared to members using car sharing as an alternative to owning a second vehicle in their household. The challenge is to strike a balance between the demand (again, within the 5 – 7 minute walking distance) for each vehicle location with the number of vehicles at each location.
Q&A Copyright Metavera 2014 – All Rights Reserved What is the average monthly usage per member? Different members have different needs. For some members car sharing is their family’s second car and for others it is their only vehicle. The majority of members use a car share vehicle 1 – 3 times. Depending on the type of membership plans your company has in place, in any given month 20% – 30% of your members will not use a vehicle at all. As an example, monthly rentals for the more active Zipcar members in some areas is 2 – 3 times a month and the average monthly bill for the whole membership is approximately $75 (in the U.S.). In areas where car sharing is well established and more popular, the average member spends an estimated $149 per month on a few hourly trips and some daily usage. Member usage (behavior) depends on the market. As an example, New York City members will have different behavior than Washington, DC or college campuses. Thus, New York City has a higher hours per reservation average than members in Washington DC. What fleet size should it take for a company to achieve break-even revenue per vehicle (RPU) with appropriate utilization? Depending on the type and scope of the car sharing business you wish to create, you can be profitable (or at least self sustaining) with anywhere from a few vehicles to several hundred. It depends on the goals of your business and the scale you are looking to achieve.
Q&A Copyright Metavera 2014 – All Rights Reserved What is the average vehicle utilization rate in hours per day? What is the average monthly revenue per vehicle (RPU)? The average utilization is 6 – 8 hours per day. This may seem a bit high, but it includes longer trips on weekends. Weekends tend to be more a daily rental utilization and weekdays are more an hourly rental utilization and this brings up the average daily utilization number. Monthly vehicle revenue (RPU) is $1,500 – $1,700 on a popular vehicle in the U.S. To help keep your weekday utilization higher, it’s often a good idea to partner with local organizations and government agencies by offering them a reduced weekday rate. How do you manage unreported damage to car share vehicles? What policies or programs can help minimize this? The majority of dents and dings will not be claimed by members and must be budgeted for. A good starting point is $40 per month per vehicle. The most important thing is to use social pressure by repeatedly reminding members to report damage and dirty vehicles. As an example, in one of the most difficult car rental markets, New York City, the members of Zipcar were very good at self policing each other. Zipcar is a membership model and members feel attached to these cars and want to keep them in good condition. They will even report other members they see abusing the cars. A well managed community of members will go a long way in reducing unreported damage and how members treat individual vehicles.
Q&A Copyright Metavera 2014 – All Rights Reserved How do you market car sharing in a new market (even a new country) where potential users are not familiar with car sharing and its advantages? How do you communicate to them why they should become a member? What are the key marketing messages that have been successful? The most obvious is the cost of owning, maintaining and operating a private vehicle in your target area. Most privately owned cars, by far, spend the majority of time parked. In urban areas that have great public transportation systems, the reasons to own a car are greatly reduced. Surprisingly, most people are not that familiar with all the costs of owning their current vehicle. Beyond the very basic expenses such as their monthly payment (or purchase price) and insurance costs, people do not focus on the other expenses (parking, gas, maintenance, damages, parking tickets) they pay for their car. The total expense is often higher than most people realize. Membership in a car sharing organization also gives members access to different types of vehicles they normally would not have easy access to- trucks, convertibles, large cars, SUVs, luxury cars, vans and similar. People like having more choices and you need to make them aware of this in your membership marketing efforts. Earlier car sharing efforts marketed the environmental benefits of car sharing, but more recent marketing campaigns have focused on what attracts most people to car sharing- saving money, accessibility and convenience. These three points are the key reasons most people use, or switch to, car sharing.
Q&A Copyright Metavera 2014 – All Rights Reserved How many fleet staff do you need for maintaining a car sharing fleet? This depends on both the size of your fleet and if you outsource some of the work to outside companies. For example, Zipcar in New York City outsourced the cleaning and maintenance of its fleet. Each vehicle was serviced every two weeks. But, early on in New York City, Zipcar had two employees on bicycles who performed this service for their fleet of 25 vehicles. Most car sharing organizations perform this service in house every two weeks for each vehicle. For the car sharing organizations who do outsource this function, the typical cost in the U.S. is $50 – $70 per month and this includes cleaning the inside of each vehicle every two weeks, external wash once a month and light maintenance such as checking tire pressures and fluids. In Europe, it’s more common for the car sharing organization to perform this service in house with their own personnel and equipment (such as specially equipped vans). In parts of the world where labor is less costly than Europe and the U.S. you can afford to do this with your own personnel and less equipment. A key difference between car rental and car sharing is car sharing members take much better care of their cars than car rental users do. Car rental users do not care about the vehicles they rent and this increases the need for servicing of the vehicles as compared to car sharing members. Car sharing members are aware that the vehicle will not be serviced when they complete their rental and it could very well be rented to one of their neighbors as soon as their rental period ends. They treat the vehicle better and clean up after themselves in most cases. Car sharing members are not the same as car rental customers. They are more of a community, they are very vocal (both positive and negative) and car sharing organizations market to them and manage them far differently than car rental companies market to and manage their customers. This community behavior also acts to police itself and keeps most members more self aware when they use the vehicles.
Q&A Copyright Metavera 2014 – All Rights Reserved What is the most common (or best) way to ensure drivers are licensed or legitimately registered to use the car? There are two issues. One issue is determining the identity and background of the person applying to be a member. The second issue is if the person driving the car sharing vehicle is actually the person who is authorized. In the U.S, Metavera has partnered with Advanced Driving Records (ADR) to provide car sharing organizations the driving history (and score) of potential members electronically, sometimes within minutes. Different car sharing organizations have different requirements for membership, often based on their insurance carrier, and this allows each organization to verify and control who they allow to access their vehicles. Some organizations require a photo of the person’s driver’s license when they register. As car sharing grows in popularity there will be a greater need to verify people, using a variety of data sources (driving record, social media, credit checks and similar), who rent the shared vehicles, both to protect from fraud and to enable faster (even instant) approval of memberships. As far as verifying the person driving the vehicle, this can be more difficult. In Germany, for example, the member’s RFID tag is attached to their driver’s license. While this issue is a consideration, it is no different than what traditional car rental companies face when they rent a car to someone.
Q&A Copyright Metavera 2014 – All Rights Reserved Why do existing car sharing organizations have so few plug-in electric (battery only) vehicles? There are several key factors that limit the adoption of electric cars for car sharing. Higher acquisition cost (even after government subsidies in all but a few areas), lengthy charging times, lack of an adequate infrastructure of charging stations and range limitations. The charging time needed between reservations is an important limitation since it reduces the availability of electric cars, which negatively impacts their revenue potential as compared to conventional cars and hybrids. However, there are several recent start ups in the UK, the U.S. and Europe with all electric fleets. They have chosen the EV to differentiate themselves from other car sharing organizations in their cities. They have also been shown to be an attractive option in the one-way / one-demand car share segment where the trips are much shorter and an EV can be driven 3 – 4 days before needing to be recharged. What are the differences in car sharing between Europe and North America? In Europe, people have access to much better public transportation and better walking and cycling in cities. Cities are laid out with most essential services much closer to where people live and work, so people need to use a car less. Consequently, there are more non-car-owning households compared to North America. However, member demographics, fleet utilization, trip length, etc. are remarkably similar.
Q&A Copyright Metavera 2014 – All Rights Reserved For one-way and peer-to-peer (P2P), what are some of the issues that are unique to these sharing models? Both service models have their unique challenges. For one-way, the vehicle could end up in an area where there is no demand for it. At the end of the day (middle of the night) you have to move these vehicles to get them back to areas where there is demand. This adds cost and makes this car sharing model more challenging. We will be seeing some independent one-way car sharing operators entering the market. An enticing aspect of peer-to-peer is it removes the financial burden of acquiring vehicles. Peer-to- peer, in combination with company owned vehicles in high demand areas is an attractive model since it allows you to offer vehicles in less popular (less densely populated) locations where you might not get even 6 hours of utilization. Also, the revenue expectations of private peer-to-peer vehicle owners is quite different (lower) than company owned vehicles. A consideration of mixing these two car sharing models is the challenge in finding appropriate insurance. Acquiring and managing the private vehicle owners and their vehicles is also challenging. What are the differences in serving various specialty segments - educational, business, government and similar? Most of the differences are in outreach, partner management, marketing and how you recruit the members of these different groups and organizations.
Q&A Copyright Metavera 2014 – All Rights Reserved Where do for-profit companies go for funding? What type of formulas work for non-profits? Schemes that work just for governments? The choice of business model really comes down to your mission and where you will get your start up capital from. For-profit companies typically receive capital from investors who expect a return on their investment. Non-profits typically secure financing from foundations, government grants and cooperatives that are more focused on the social benefits of car sharing. There are several large, business like cooperative car sharing organizations in Switzerland and Germany. In North America they usually look and act more like non-profits. Business loans are another source of capital. The source of your capital often dictates whether you create a non-profit or a for-profit business for car sharing. If you are in a large city, you have access to capital through standard investment channels and in smaller towns you are more likely to create a non-profit company. Government grants and partnerships with cities can be highly beneficial. Some of the largest U.S. car sharing companies used government grants to get started (Chicago, San Francisco, Minneapolis, Philadelphia). Car sharing helps your government agency or local foundation meet their social and transportation goals by reducing car ownership, reducing vehicle miles driven (congestion) and lowering parking demand. In the U.S, CMAC (Congestion Mitigation and Air Quality Improvement Program) has been one of the major sources of this type of funding and is usually administered by municipal planning organizations. You will need to build a partnership with city government since they are responsible for acquiring this type of funding from the federal government.
Q&A Copyright Metavera 2014 – All Rights Reserved Is college and university campus use proving to be a significantly higher risk profile for accidents and damage? Not really. There is enough available data to show that car sharing rental has a lower risk profile than traditional auto insurance policies since the user drives less. This applies to younger drivers as well as older drivers. The insurance industry will argue that under age drivers (18 – 21 years old) have a higher risk of getting into an accident or causing damage to a vehicle. That said, CSOs have implemented methods to deal with this issue by adjusting their internal policies such as requiring additional insurance coverage by the member (their insurance carrier acts as the primary carrier) or the member’s school. More and more CSOs are launching in university markets. This is by design and critical in targeting the next generation of car share users.
Contact Us Copyright Metavera 2014 – All Rights Reserved If you would like to talk to our presenters about becoming a Car Sharing Operator or if you’d like access to our recent webinar recording on this subject (which this slide deck is from), please contact them using the information below. If you would like to be notified when the next webinar in our series on How To Become A Car Sharing Operator is broadcast, please email us below. firstname.lastname@example.org David Brook David.Brook@team-red.net Julian Espiritu email@example.com
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