Technology of the week, team 3 – the car sharing industry
In 2010 the world vehicle population surpassed one billion (wardsauto.com, 2012). The percentage of the world’s population living in urban areas will jump from 49% and to 59% by 2030, aggravating issues related to urban congestion and pollution. As BRIC economies continue to grow, so does their appetite for motor vehicle ownership. But if one focuses on utilization of motor vehicles, most of which stand idle up to 23 hours a day (Shaheen and Sperling, 1998), then personal ownership may seem less and less sensible. This shift in views on car ownership has resulted in ambitious solutions to solve the inefficiency from different firms, such as Uber and Zipcar – the units of our analysis.
All these solutions fall under the ‘Car Sharing’ concept – the ability to utilize a car when required without the hassles and risks associated with ownership (innovativemobility.org, 2014). This concept differs from that of traditional taxi model as it was only possible with the advent of IT, which allowed for the creation of reservation and positioning systems, as well as being responsible for the proliferation of smart phone devices among the general population.
Uber is a car-sharing service company, which matches drivers and passengers through the self-developed mobile application, taking 20% of the revenues. Zipcar is a membership based car sharing company that intends to provide reliable and convenient access to on-demand transportation. The company charges a fixed monthly or annual membership
fee in addition to car rental charges.
In the current market situation, both companies are offering attractive IT-enabled services, both to riders or drivers, in ways that have established companies rapidly reacting to changing market conditions. Existing business networks do, however, help them in this transition and gain a position in the market. By being acquired by Avis Budget, Zipcar has overcome the high capital requirement, enabling the high investments to be made competitively utilizing business partnerships. Uber is attempting to build a sufficiently large user and driver network to provide enough traction, crucial for fending off possible entrants to the market. Without capital requirements, it is a low cost business model.
By breaking down entry barriers, Uber is part of a larger change in how personal transportation is arranged. While car manufacturers try to be a part of the infrastructure in the form of “Zipcars”, the “Ubers” are attempting to capture and familiarize both the driver and rider-users to their interfaces. Combining a rideshare platform similar to Uber with car sharing like Zipcar will allow to create real-time travel auctions. Not only would the driver be selected based on location and reputation, but also the car from one of the networks; all optimized based on the end destination and route to be taken.
It may seem an impossible thought to optimize such a network, but we are not far from driverless, autonomous vehicles. They are already being tested on public roads and when they do come to market, how many cars will be needed?
Innovativemobility.org, (2014). Innovative Mobility Research – Carsharing. [online] Available at: http://www.innovativemobility.org/carsharing/ [Accessed 13 Sep. 2014].
Rogowsky, M. (2014). Zipcar, Uber And The Beginning Of Trouble For The Auto Industry. [online] Forbes. Available at: http://www.forbes.com/sites/markrogowsky/2014/02/08/viral-marketing-car-sharing-apps-are-beginning-to-infect-auto-sales/ [Accessed 13 Sep. 2014].
Shaheen, S. and Cohen, A. (2013). Carsharing and personal vehicle services: worldwide market developments and emerging trends. International Journal of Sustainable Transportation, 7(1), pp.5–34.
Shaheen, S. and Sperling, D. (1998). Carsharing in Europe and North America: Past, Present, and Future. Transportation Quarterly, 52(3), pp.35-52.
Wardsauto.com, (2012). World Vehicle Population Tops 1 Billion Units | News & Analysis content from WardsAuto. [online] Available at: http://wardsauto.com/ar/world_vehicle_population_110815 [Accessed 13 Sep. 2014].