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Viral Marketing: Car Sharing Apps Are Beginning To Infect Auto Sales

Feb 8 2014, 8:00am CST | by

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Viral Marketing: Car Sharing Apps Are Beginning To Infect Auto Sales
 
 

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Viral Marketing: Car Sharing Apps Are Beginning To Infect Auto Sales

There’s a good chance if you’re a city dweller and a regular Zipcar user, you don’t own a car. And according to a new study from Alix Partners, you’re probably not alone. Had it not been for car-sharing services, automakers would have sold about 500,000 more new cars over the past decade. And Alix believes another 1.2 million sales will be lost by 2021 as every new car added to the fleet of Zipcar, RelayRides and the like leads to a remarkable 32 personal cars never being purchased by regular folks. The problem for automakers is that’s probably the good news. The study, which was reported on CNBC, didn’t even look at the latest wave of taxi-style apps like Uber and Lyft, which make it even easier for urbanites to forgo ownership. So, just how bad can it get?

Well consider this: The number of “zero-car families” has been growing since 2007, after shrinking nearly every year since 1960; it’s approaching 10%. While the recession has doubtless played a role, it’s less than you might think. First, there has been an increasing move back toward the cities, where transit is more readily available. Second, millennials seem especially uninterested in owning their own cars. Third, the trend away from driving actually dates back to 2004, when the economy was still thriving. A government measure called “per capita vehicle miles traveled,” which had gone up steadily for decades began trending down that year and has fallen ever since. After 8 consecutive years of declines, on average we’re driving as much as we did in 1996.

It’s not like automakers are unaware of the trend. Mercedes-Benz parent Daimler is behind the innovative Car2Go service, which rents out tiny Smart cars in a flexible model like Zipcar. And BMW has backed DriveNow. GM for its part has facilitated owners renting their vehicles through RelayRides using OnStar technology. But all of these still involve you getting the car, driving the vehicle and ultimately parking it somewhere. As I write this in the wee hours of a rainy Saturday night in suburbia, if I want to, I can have an Uber driver here at my door within 10 minutes who’ll drop me wherever I want to go. While that certainly isn’t true everywhere — and I’m not ready to abandon my car quite yet — if Uber has its way, more of you will have that option sooner rather than later.

The company has raised more than $360 million, is expanding across the globe, and is signing up scads of drivers to meet the demand it generated by a recent fare cut. While it isn’t alone in the smartphone dispatchable taxi universe, it’s doing everything it can to become the branded, worldwide leader. And while the service works best within the confines of a city, at least out here in the San Francisco area, it has become surprisingly useful in the far-flung suburbs already. Not bad given the service has only been around since 2010.

Perhaps the biggest challenge for automakers is that the economics of car sharing are so favorable. A Zipcar user who only needs to drive for a few errands a month will likely save hundreds of dollars by renting from the Avis-owned sharing pioneer, which made easily hourly rentals possible and has numerous pick up points in most major cities. But ever the regular Uber user might end up saving number depending on where they call home. A $400-per-month car payment plus $200 more for the garage and $100 for insurance isn’t uncommon in a place like San Francisco. For $700, you could spend $25 a day and wind up breaking even (figuring that parking on nights out would add up). While you will find yourself standing around waiting to be picked up at times, you won’t find yourself being the person dealing with other drivers and their varying skills. You can text to your heart’s content in the back seat. Or relax.

Realistically, all of this is good news for us regular folks even if its not good news for the car companies. “This study suggests that car sharing nationally could scale up … and if that happens, the impact on the traditional automotive market could be explosive,” said Mark Wakefield of Alix Partners. Again, all of this has been made possible by technology, smartphone apps most especially that let you reserve a Zipcar or an Uber within seconds. “Software is eating the world,” famed venture capitalist Marc Andreessen said in 2011. Now, it’s taking bites out of the giant global auto industry.

Follow me on Twitter and on Facebook. Find the rest of my Forbes posts here.

Source: Forbes

 

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<a href="/latest_stories/all/all/31" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

 

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