Daimler, BMW bullish on car-sharing

Daimler says its car-sharing program is already profitable in multiple cities and BMW expects its scheme to start making money this year.

Both German automakers also predict that their mobility businesses will generate 1 billion euros each in annual revenues starting in 2020 as more people take advantage of renting cars by the minute for short journeys within crowded cities.

"You're witnessing a tipping point in the car-sharing market. It's becoming mainstream," Tony Douglas, head of marketing and sales for mobility services at BMW, told Automotive News Europe.

Ford, Toyota, Volkswagen, Renault and PSA/Peugeot-Citroen also have established car-sharing arms to take advantage of a sector that analyst Frost & Sullivan forecasts will grow to 26 million global users by 2020 from 2.3 million now. Europe is expected to have 15 million car-sharing customers by 2020, up from 1 million today.

BMW's DriveNow scheme, run in partnership with rental company Sixt, has expanded to five cities and 1,600 cars after starting two years ago. Douglas predicted the business will turn its first profit this year. The target is 1 million customers by 2020.

Daimler's Car2Go is available in 21 cities with a global fleet that is expected to grow to 10,000 cars this year from 6,100 last year. The fleet is made up of Smart ForTwos that generate 10 million rentals from half a million customers.

Car2Go is profitable in the three major cities used to launch the program in 2009 – Hamburg, Germany; Vienna, Austria; and Vancouver, Canada – said Robert Henrich, managing director of Daimler Mobility Services, who added that it takes three to four years for a city scheme to make money.

BMW's Douglas said that a key to success in the sector is making sure that people can always find a car nearby. "It's like the bus stop. If there's a stop within 400 meters of their house, then people will use the bus. Same with car sharing. If they'll find a car within 500 meters they'll use it," he said.

Risky business?

Automakers say car-sharing customers are potential future car buyers, despite analyst estimates that the 20,500 cars in European sharing fleets in 2011 replaced at least 250,000 private cars. "The automotive market is growing," Daimler's Henrich said.

"It's only specific urban markets like London where the number of cars will go down." In those megamarkets, Henrich said that car-sharing schemes can reconnect automakers with younger drivers who cannot afford a car of their own. "We don't want to lose those customers. If you start a family you need a car again and as a carmaker it's good to already have a close relationship with them."

Automakers also are using their car-sharing schemes to demonstrate innovative new cars, such as electric vehicles.

Daimler's Henrich, however, said that it's difficult to make a business case for battery-powered cars such as the Smart ForTwo EVs that are part of Car2Go.

He blamed the weak demand for EVs on the lack of charging points, many of which get blocked by cars that don't need to be plugged in.

It's also not easy to succeed in the sector with fuel-powered cars. Henrich said the cost of street parking for car-sharing vehicles is the biggest expense after depreciation. "In many cities its 200 euros per month, which blocks further growth," he said.

The car-sharing business will not expand enough to soak up excess factory capacity, according to Frost & Sullivan, which predicts the global car-share fleet in 2020 will be 500,000 cars, with 240,000 in Europe.

"If you break that down it's very small for manufacturers," said Franck Leveque, automotive and transportation analyst at Frost. "It has to fit within a mobility strategy rather than a strategy to sell cars."

The strategy for BMW and Daimler includes investment in smartphone-delivered technology that will help people get around town easier.

For example, Daimler is expanding its Moovel app that lets travelers in Berlin and Stuttgart buy an entire door-to-door journey with a tap of a button. The program includes trains, trams, bikes and Car2Go Smarts.

BMW has invested in smart-parking applications such as ParkNow and Parkatmyhouse, which connect drivers with free spaces, either in dedicated parking facilities or in people's driveways.