Vehicle on Demand

Vehicle on Demand

Vehicle on demand refers to services in which the customer gains access and control over a vehicle in exchange for money. This means that for a limited amount of time they are able to control and treat the vehicle as if it was theirs. This way, customers retain most of the convenience and exclusivity that comes with vehicle ownership. Vehicle on demand services encompass multiple modes of mobility such as cars, scooters and bikes. Depending on the length of use rights, these models can be distinguished between conventional (car-) rental and (car-) sharing. These models can be further distinguished in station-bound and free floating models, meaning that vehicles will have to be returned to a pre-defined station or not [8].

In the following sections we will distinguish between car sharing and so-called “micro mobility” services, which are intended for shorter-distance travel. For reference, the current mean travel distance for electric scooters in Germany is 2 kilometers [1]. Whereas car sharing could be suitable for shopping and transporting multiple people or heavy goods, micro mobility may be a worthwhile alternative to cars for shorter distances. For example, electric scooters could be used for commuting to and from public transport stops, or for short distances within city centers.

Potential

Just like subscription models, car sharing can offer greater flexibility compared to owning a car [2]. Car sharing is also fairly convenient to use, which has shown to be the most important reason for using such sharing mobility models for the majority of customers [3]. It might also be cheaper to use than car ownership, since there are little fixed costs for the customer associated with it. For example, some models estimate that 46% of compact car owners could save money by using car sharing instead of buying a car [2].

Car sharing could also make car travel more efficient by reducing the overall number of cars in operation. In 2018, roughly 40% of all cars in Germany were not used on an average day, with the average car being left unused for 97% of the day [4]. Car sharing models could help improve these figures by reducing idle time per car and increasing average utilization. As a result, the number of cars per household could decrease significantly.

This effect can already be observed in practice. Recent studies show that the introduction of car sharing in urban areas can in fact reduce the number of cars, as users postpone new vehicle purchases because of it [5]. Thus, if coverage and reliability are high enough, more customers may choose to forego a car purchase in favor of car sharing. In addition to less cars, this could also mean less need for parking space and potentially less traffic and congestion overall.

Other models like electric scooters and bike sharing could reduce the need for a car as well. In Germany, 30 million car trips are two kilometers or less every day, which poses a great opportunity for micro mobility services [6][1]. Current estimations conclude that about 10% of all car trips in Germany could be replaced by e-scooters or bikes [1]. This means that about 10% of all car trips are short distance, driven in suitable weather conditions and without a passenger, or high loads. Especially in urban areas, these models could reduce car dependency. As a result they could also help reduce local pollution and congestion.

Issues

On the other hand, the true potential of sharing services remains to be seen. Most outlooks in a future where car sharing dominates city scapes assume substitution with car ownership. In other words, it is assumed that widespread availability of carsharing would reduce the number of people who own a car.

However, this is not the case so far. In recent times, car sharing has been shown to have a limited substituting effect in regards to car ownership. A 2018 study found that as of now only 20% of current car owners would be willing to forego a car purchase in favor of car sharing [7]. Other projections conclude that “some (but by no means all, or even most) owners of private vehicles could be convinced to make the switch.” [2] (BCG). In Germany roughly half of car sharing users also still own one or more cars [9]. Overall this implies that car sharing currently substitutes car ownership only in a somewhat limited way. Thus, the true potential of this business model is still uncertain.

Given the limited market share of car sharing, the current economics of the models are also a critical obstacle. According to a recent study, economies of scale and profitability of car sharing models can only be achieved in densely populated areas with high levels of vehicle utilization. However, this level of utilization cannot be realistically achieved in most European urban areas [10]. Furthermore, as most users of car sharing services claim to use them only occasionally for convenience, the necessary level of utilization which leads to profitability is even harder to achieve [10].

Outlook

Overall, on-demand vehicle services are a key innovation in mobility business models. The possibility of flexibly renting a car could let some households forgo owning a car altogether in the future. However, studies and customer surveys show that many consumers still value owning a car themselves. In addition, service operations outside of large metropolitan areas are hardly profitable. All in all, it is therefore still uncertain whether car sharing will be a revolutionary business model or if it remains a more marginal phenomenon.

See Also

• 🔄New Ownership Models

• 🚖Mobility on Demand

Sources

[1] Gebhardt, L., Wolf, C., Ehrenberger, S., Seiffert, R., Krajzewicz, D., & Cyganski, R. (2021). 15-20. E-Scooter – Potentiale, Herausforderungen und Implikationen für das Verkehrssystem. Deutsches Zentrum für Luft- und Raumfahrt e.V.

[2] Bert, J., Collie, B., Xu, G., & Gerrits, M. (2016, February 23). What’s ahead for car sharing? BCG. https://www.bcg.com/de-de/publications/2016/automotive-whats-ahead-car-sharing-new-mobility-its-impact-vehicle-sales

[3] Heineke, K., Kloss, B., Möller, T., & Wiemuth, C. (2021, August 11). Shared mobility: Where it stands, where it’s headed. McKinsey. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/shared-mobility-where-it-stands-where-its-headed

[4] Bundesministerium für Verkehr und digitale Infrastruktur. (2019). Mobilität in Deutschland - MiD. 4. https://www.mobilitaet-in-deutschland.de/pdf/MiD2017_Ergebnisbericht.pdf

[5] Martin, E., & Shaheen, S. (2016). 22. The Impacts of Car2go on Vehicle Ownership, Modal Shift, Vehicle Miles Traveled, and Greenhouse Gas Emissions: An Analysis of Five North American Cities. http://innovativemobility.org/wp-content/uploads/2016/07/Impactsofcar2go_FiveCities_2016.pdf

[6] Bundesministerium für Verkehr und digitale Infrastruktur. (2019). Mobilität in Deutschland - MiD. 74. https://www.mobilitaet-in-deutschland.de/pdf/MiD2017_Ergebnisbericht.pdf

[7] Liao, F., Molin, E., Timmermans, H., & Van Wee, B. (2018). Carsharing: The impact of system characteristics on its potential to replace private car trips and reduce car ownership. Transportation, 47(2), 935-970. https://doi.org/10.1007/s11116-018-9929-9

[8] Bundesverband CarSharing. (2021). Unterschiede free-floating & stationsbasiertes CarSharing. https://carsharing.de/presse/fotos/zahlen-daten/unterschiede-free-floating-stationsbasiertes-carsharing

[9] Bundesministerium für Verkehr und digitale Infrastruktur. (2019). 17. Mobilität in Deutschland - Kurzreport. http://www.mobilitaet-in-deutschland.de/pdf/infas_Mobilitaet_in_Deutschland_2017_Kurzreport.pdf

[10] Stolle, W. O., Steinmann, W., Rodewyk, V., Rodriguez Gil, A., & Peine, A. (2019). The Demystification of Car Sharing. ATKearny. https://www.de.kearney.com/documents/1117166/0/Car+Sharing.pdf/3bff4a9a-1279-b26f-3b23-8183f14979ce?t=1567671915000