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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 26-Jul-2019
Posted by: Michael PUTZ

Why Carsharing Disrupts Car Manufacturers


In industry, using instead of owning and borrowing instead of buying is the order of the day. Now this development is affecting the private capital goods car and also many other means of transport. The established vehicle manufacturers have so far hardly reacted to car sharing, although the trend holds enormous potential for disruption.

In many sectors of the economy, it is common for several manufacturers to share the resources of expensive machinery. At the latest since the grain harvest with a sickle was no longer economical, several farmers joined together in a machine ring to purchase and use a combine harvester together. Even competing manufacturers sometimes share capacities in order to produce more cheaply: For example, the popular family vans VW-Sharan and Ford Galaxy were more or less identical for many years.

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High costs for a device that stands unused for most of its lifetime

From an economic point of view, the purchase of a private car is extremely unwise: the investment costs are high. In addition, there are other burdens such as service, maintenance, insurance, taxes and fuel. All this for a system that stands still for 23 of the 24 hours of a day and even then can still cause costs such as parking fees or garage rent. The vast majority, however, accepts these disadvantages for two reasons:

1) A car of one's own is always available when the user needs it. Outside the cities, the private car is often the only means of transport that can be used comfortably and therefore has no alternative for many.

2) The car is a status symbol and a means of expressing one's personality to the public.

However, these arguments are becoming less and less important: younger groups of buyers, especially from urban areas, are less and less considering the car as a status symbol. Urbanization continues to grow. There are many other and always new mobility alternatives available in cities. They are often not only faster than private cars, but also cheaper and easier to use.


The number of mobility concepts explodes in Vienna

The second largest German-speaking city, after Berlin, Vienna, has seen many new means of transport in recent years: Foldable scooters as well as Segways and hoverboards have long since been used not only as toys, but also to make progress. At times, freight bicycles even received support from the city. The user does not have to buy some of the new but also the established means of transport himself, but can borrow them:

  • Currently, the e-scooters of six different providers are flooding the streets of the Danube metropolis. However, it is not yet clear whether the small speedsters will be able to assert themselves as a serious mobility alternative.
  • Rental bicycles have been appreciated by both Viennese and tourists for more than 15 years. The Citybike Wien system still works today and offers around 1,500 bicycles with uncomfortable but low-maintenance solid rubber tyres. The lakeside city of Aspern - Vienna's largest urban development area - has its own rental bike system, which also offers cargo bikes. However, two suppliers from Asia with their rental bicycle fleets did not only increase mobility, but also caused trouble: The low quality cheap bicycles were too often the victims of vandals and became bulky waste, which flooded the public space.
  • The vehicles of car sharing providers such as Drive Now or Car2Go have been an integral part of Vienna's cityscape for many years. The two providers are in the process of merging to form a joint company called Share Now.
  • Scooters or mopeds powered by petrol or electricity can be borrowed in Vienna just as easily. Mo2Drive offers a wide range of scooters and GoUrban offers electric scooters.


Car manufacturers ignore the sharing economy

Divided mobility can develop an unprecedented diversity with the help of digitization. But car sharing and the like are only just beginning. An indication of this is, for example, that no manufacturer has yet offered vehicles that are specifically geared to the requirements of rental. This is particularly drastic in the case of rental scooters. They are unusable after an average of 3 months. But even automobiles are not currently designed for a long service life. This is how manufacturers want to secure sales in the future. The English taxis - the Black Cabs - prove that it is also possible to build vehicles that last almost forever. But the planned obsolescence is not a specialty of the automotive industry. This strategy became publicly known through the discovery of the Phoebus cartel in the 1920s. At that time, light bulb manufacturers undertook to ensure that their products were not allowed to glow for more than 1,000 hours. At the time, there was talk of "standardization of service life". The fact that light bulbs work longer is demonstrated by this specimen, which can be observed on a webcam: The bulb has been glowing since 1901. The transmission to the Internet, which began in 1990, has been interrupted three times because the webcam broke down.


Divided mobility demands durable products

Whether light bulb or automobile, planned obsolescence is a concept with little promise for the future in times in which sustainability plays an increasingly important role. If the user no longer wants to buy the product, but only wants to use it, it is even economically pointless for the supplier to include an expiration date in his products. With "Mobility as a Service" or "Transport as a Service", providers can maximize their revenues if the vehicles last a long time and require as little service and maintenance as possible. The fact that they no longer correspond to the state of the art due to their long service life can be prevented by remanufacturing or remanufacturing. This means the reconditioning of used products, which then again comply with modern standards in terms of quality and technology.


Autonomous driving takes car sharing to a new level

Although many car manufacturers offer car sharing themselves or together with partners, this trend has not yet really arrived in their production halls. A new technology, in which the established players cannot claim the leading role for themselves either, could increase the attractiveness of shared mobility by leaps and bounds. While many car manufacturers are only developing autonomous driving or the various stages of it further on test tracks, Tesla has been refining this technology for years in everyday operation. With the help of built-in cameras and sensors, each individual car collects data each time it travels, making autonomous driving better and safer. Fully autonomous vehicles can make car sharing even easier. The cars are always exactly where and when they are needed and independently bring the passenger to their destination.


Earn the purchase price of your own car with car sharing

But this convenient function is only one advantage that car sharing can provide in combination with autonomous vehicles: Tesla has announced its intention to launch robot taxis on the market next year. This innovation, which makes services like Uber look rather pale, will not only change the taxi industry. By means of an app, every Tesla owner can make his own vehicle available in a ride-sharing network. Car sharing becomes a good business for every Tesla owner. According to Elon Musk, this could earn around 30,000 US dollars a year. Background: The cheapest Tesla currently costs about 35,000 US dollars. The car sharing daughters of the car manufacturers could soon face competition from a swarm of Tesla owners.



Conclusion: Why Carsharing Disrupts Car Manufacturers

More and more consumers are taking pleasure in using expensive capital goods instead of owning them. In the future, car manufacturers will earn less and less from selling their products, but will have to generate their sales with "Mobility as a Service" or "Transport as a Service" offers. But the sharing economy demands completely different products: These have to be durable and low-maintenance so that the provider can maximize his profits. Today's automobiles are the opposite. New technologies, such as autonomous driving, could bring a new boom to car sharing. Established manufacturers are lagging behind this technology and new vendors like Tesla. Its robotic taxis announced for the end of the year could also establish themselves as a source of income for vehicle owners and create enormous competitive pressure in the car sharing industry.

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Image Source: Cover picture: https://pixabay.com/de/photos/carsharing-mietwagen-auto-kfz-1436203/

Michael PUTZ

Born in the Salzkammergut. After working for Shell and Porsche, he concentrated on innovation management as a study assistant at the Innovation Department of the Vienna University of Economics and Business Administration. In 2003 he founded LEAD Innovation and manages the company as Managing Partner. Lectures at MIT, in front of companies like Google or NASA.

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