by Andre Haddad
posted on October 22, 2019
Fleet-based car sharing services are being rocked by an existential crisis. The most recent casualty in the fallout is Car2Go, who recently announced that they’d be pulling out of several markets by the end of the year, citing “a volatile and changing transportation market”. Car2Go’s story is just the latest in a series where fleet-based car sharing businesses are struggling to maintain their economic footing. “We have had to face the hard reality that despite our efforts, we underestimated the investment and resources that are truly necessary to make our service successful in these complex transportation markets amid a quickly-changing mobility landscape,” said a Car2Go spokesperson.
Hearkening back to Zipcar’s fall from grace back when they were acquired for less than half of their peak market cap in 2013, the business model has shown flaws. Following suit, Enterprise Car Share, ReachNow, and LimePod shut down operations in most cities, or completely, because of the competitive landscape. Key US cities that have seen recent exits from fleet-based car sharing services include Denver, Chicago, Washington, D.C., Seattle, Boston, and San Francisco.
Why fleet is flawed
At the end of the day, fleet-based car sharing business models just don’t make financial sense. They’re not just economically unsound, what with soaring insurance costs, parking premiums, maintenance costs, and telematics devices, but often yield shoddy customer experiences. And, in today’s rapidly evolving mobility landscape, they simply can’t compete with ride sharing, micromobility options (scooters, bikes, etc.), and of course, peer-to-peer car sharing.
Peer-to-peer car sharing businesses like Turo avoid the operational overhead of fleet-based businesses (renting parking spaces, buying cars in bulk, etc.) by simply connecting people who need cars with people who have cars they don’t use all the time. For peer-to-peer hosts, parking and car maintenance are essentially sunk costs that they would be paying anyway, so their Turo income is all net gain, while Turo doesn’t need to shoulder those costs directly to operate. Additionally, the cars shared on peer-to-peer platforms will be naturally more diverse and available in more locations — unlike fleet-based car sharing which offers a more limited variety of vehicles at fewer locations, hindering their ability to scale sustainably.
Not only is peer-to-peer car sharing more economically viable, but it’s also a better experience. Consumers enjoy richer vehicle selection that’s often cleaner and better maintained than commoditized fleet cars. And importantly, peer-to-peer car sharing opens up a new world of economic opportunity for an underserved segment of the consumer-base — people with underused assets who could offset the cost of ownership by putting them to better use.
The multi-faceted future of mobility
The future of urban mobility is not car centric — congestion, parking, and vandalism are taking their toll on urban drivers. We’re witnessing a strong turn toward micromobility, ridesharing, and even public transportation. Cars continue, however, to find their relevance in longer trips — weekend getaways, jaunts out to the suburbs, longer vacations — and that’s where peer-to-peer car sharing shines. Beyond fundamental travel use cases, the diversity of vehicles available on Turo enables prospective car buyers to take longer test drives with a specific model before taking the plunge and buying it, and allows enthusiasts to drive their dream cars without ponying up to buy them outright.
So as several fleet-based car sharing players look at their balance sheets with agitation and existential uncertainty, peer-to-peer car sharing is nestling nicely into the future of mobility. In cities, convenience is king — for short trips of say, 1-3 miles, people walk or grab a bike or scooter, and for longer local trips (3–15 miles), people take public transit or rideshares — fleet-based car sharing is often more trouble than it’s worth for these medium-sized trips.
But consumers still crave the freedom that cars create. For longer trips, or vacations in a new place, people need to drive, and that’s where peer-to-peer car sharing makes total sense. While the bought-in-bulk fleet is proving to be an unsustainable thing of the past, the collaborative, crowd-sourced fleet is alive, well, and flourishing.
Also published on LinkedIn.
Andre Haddad
Andre is the Turo CEO and a true car enthusiast. After many years in the consumer web space, he combines his passion for cars, technology, and the environment each day at Turo as he works to put the world’s one billion cars to better use.
