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How car sharing can become simpler and more profitable

How car sharing can become simpler and more profitable

Neutral car sharing network infrastructure offers new opportunities to mobility businesses, as well as, more convenience to users.

Car sharing is growing at the speed unimaginable before, media is all hyped up about the end of car ownership — the cost of which is too high, while benefits do not match the expense. While few doubt the future of car sharing, the most important challenge — convenient access to cars — remains unresolved. A customer often finds that there are no available vehicles in the close vicinity to them, prompting them to search for alternatives to satisfy their transportation needs.

Do you remember how painful it was to travel abroad and ask for you cellphone roaming contract? Well this is what we are facing today with users having to register with multiple providers or using alternative services. What if car sharing could be used in the same way we use our cellphones today — seamlessly, independent of the city or country we are?

Today access to vehicles remains an issue for most car sharing businesses. In big urban areas that have had a strong sharing culture, like Berlin, or LA, the problem is less visible, but outside of those areas the segmented market and low number of vehicles available creates a very real problem for operators and customers — the lower number of vehicles available, the lower the percentage of their utilization, while higher vehicle volumes can increase maintenance costs and shave the profit margins to the thinnest possible level.

Customers of one operator are only able to see vehicles from that company, and if the vehicles from that company are not available near the user, then they just move on to use another mobility service — be it ride hailing or public transport. Several startups have tried to tackle the issue through aggregation of nearby vehicles, but this also puts an extra burden on the user, who has to have different accounts with different operators. Another way to the problem solution is through Mobility-As-A-Service (MaaS solutions), where a user buys a bundled package which theoretically includes all mobility services, like car sharing, public transport or bikes. However, in practice, the options available to the users of MaaS are local and limited. Bundling and unbundling of services has been a very classic solution to all problems that tech or mobility companies usually face — users don’t use some of the services? — bundle them in a package with the ones that they use more often; users have too many options and don’t use most of them? — unbundle, pay for what you use. But neither bundling or unbundling serve the issue of convenient access to shared vehicles.

As businesses search for solutions to the marketplace, supply and demand problem, tech companies throw more and more technology at it — be it AI or blockchain. AI might be able to predict demand for vehicles and the business will be able to proactively supply the vehicles at those location. However, as in many other cases with AI, while big operators can harvest large amounts of data and increase their efficiency, there is not enough data available, especially to smaller businesses to make AI efforts count. There is a much more efficient solution to the issue that other industries have employed for quite a while and that solution is network infrastructure. Two other industries show a great example how network infrastructure can make business more efficient — telecommunications and banking.

In telecommunications, infrastructure remains the highest cost. 10–15 years ago, we only had the operators that could afford to build and maintain their own cell towers. But today as mobility of individuals across countries has increased, operators allow their customers to connect to towers of other companies, especially in foreign countries where they don’t operate. Locally, we have numerous virtual operators that do not have any infrastructure but rely on the infrastructure of others. This has brought down costs for local consumption of telecommunication services, as well as, for roaming. While big telecommunications operators remain in control of infrastructure, it has never been easier to start a virtual mobile network over other companies’ towers. The owners of infrastructure do not just see virtual operators as competitors and do not limit their access to towers, but rather see them as their clients.

In financial services, networks like Visa and Mastercard have been around for a long time. None of these companies issue actual credit cards, but offer the banks opportunity to function across numerous countries without extra burdens. Banks do not compete with Visa, but rather use it as infrastructure and network provider, enabling their customers to make financial transactions more easily.

While such established examples exist for several industries, mobility services are still reluctant to share their infrastructure or fleet with other operators. A neutral provider of network for car sharing seems to be a good solution to this challenge. In such network, services are not bundled but similar to roaming in telecommunications or Visa network in financial services, operators use each others fleets and charge each other appropriate fees. The network doesn’t only aggregate other mobility services but provides them through the preferred operator, seamlessly without registration on another network. For example, let’s imagine a user who lives in Berlin and its preferred mobility service is car sharing company DynamicCar (not a real operator), she travels to London on a business trip; DynamicCar doesn’t operate in London, but upon arrival the business traveler sees the local car sharing providers in her DynamicCar app. The user can book the service without downloading a new app, signing up or any other hustle. She just gets off the plane and uses the service, at the end of the trip she is billed by DynamicCar and the money is collected by the network, DynamicCar then pays a fee to the local provider whose car was actually used in the trip. DynamicCar earns on the trip, as does the local provider, so it’s a win-win-win situation, as the client was able to use a new service seamlessly like at home. The same can be true within the country or city, where cars of DynamicCar might not be available. This enables wider access to vehicles for the user, as well as, profit sharing between the local provider and DynamicCar. Such a network also encourages existence of virtual operators, that do not actually have fleet, as well as better utilization of fleets for companies that have a fleet but do not actually work on user acquisition or branding. Unlike MaaS services, that are very useful in big cities, network allows for coverage over larger areas, giving users access to mobility services across various cities and countries. An independent network, integrated into MaaS solutions will increase the acceptance of both shared mobility as well as public transports.

Big automakers and ride hailing companies are already building their own network infrastructure — Tesla is expected to start its own car sharing service, however its vehicles won’t be able to participate in other car sharing operations, only the one provided by Tesla. The problem will most likely be the same with other big companies — most networks they create will be closed ones, as they have vested interest in renting out their own vehicles, not those of their competitors.

Neutral car sharing network can increase utilization of fleets, as well as, provide more useful and easily accessible transportation solutions to users, even to manufacturers that will not be providing resources to the competition but to a global independent network.

Written by Rui Avelãs. Mr. Avelãs is the VP of Mobiag.

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