What is it about?
Car sharing programs allow members to access a fleet of vehicles that they can use for personal transportation; users are then billed based on the length of time they removed the car from the pool of shared vehicles. The car sharing provider is responsible for gas, maintenance, and insurance. In doing so the fixed costs of car ownership are transformed into variable costs. Although the model of car sharing was initially introduced by third-party providers like Zipcar, OEMs like Daimler and BMW have been particularly active in introducing car sharing programs. Motivated by the OEMs’ growing interest in the car sharing business, we developed a model to determine how introducing a car sharing program affects an OEM’s: (1) profits, (2) environmental impact, (3) incentive to produce vehicles of high fuel efficiency and (4) ability to comply with the Corporate Average Fuel Economy (CAFE) standards. We found that higher-end OEMs (i.e., OEMs typically producing vehicles of higher driving performance but lower fuel efficiency) can benefit more from introducing car sharing programs. Introducing car sharing allows OEMs to also provide vehicles of higher efficiency. Lastly, our model suggests that unless OEMs are granted incentive multipliers so that each shared vehicle counts as more than one in the calculation of their CAFE performance, car-sharing may hinder their ability to meet the enacted CAFE standards.
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Why is it important?
There is growing evidence of OEMs undergoing the transformation from strictly selling cars to becoming mobility solution providers. Our paper shows that such a transformation makes economic sense. This can incentivize more OEMs to participate in the car sharing business. Furthermore, the production and operation of vehicles represents a very large environmental impact. Environmental regulations, specifically CAFE standards, are designed to encourage OEMs to increase their overall fleet efficiency by increasing individual fuel efficiency and sales of fuel efficient models. Our study shows that car sharing can reduce the OEM’s environmental impact. However, car-sharing programs do not necessarily improve the OEM’s compliance with the CAFE regulation since they can decrease the overall number of high efficiency vehicles produced. Our study suggests that this issue can be addressed if OEMs offering car sharing are granted incentive multipliers so that each shared car they provide counts as more than one vehicle in the compliance calculation. Environmental regulations need to be adapted for car sharing to realize its full environmental value and for OEMs to embrace it as a viable business model.
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Read the Original
This page is a summary of: The Car Sharing Economy: Interaction of Business Model Choice and Product Line Design, Manufacturing & Service Operations Management, May 2017, INFORMS,
DOI: 10.1287/msom.2016.0605.
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Resources
Automakers Race to Get Ahead of Silicon Valley
Car manufacturers are launching car-sharing programs in response to ride-sharing startups that could eventually make owning a vehicle unnecessary. As cars become autonomous the distinction between car-sharing and ride-sharing will essentially disappear; by entering the market via car-sharing programs, manufacturers gain valuable experience and knowledge that will position them for the shift to autonomous vehicles. Becoming involved in car-sharing in advance of this shift away from private vehicle ownership will allow manufacturers to adapt.
What's Ahead for Car Sharing? The New Mobility and Its Impact on Vehicle Sales
A report from the Boston Consulting Group found that while car-sharing is projected to rapidly increase, it's impact on new vehicle sales will be mitigated by an increase in sales for car-sharing operations and consumers who won't completely forego car ownership. Furthermore, analysis shows that a significant portion of car owners would have lower costs of ownership under a car-sharing model. The report discusses ride-sharing as a serious threat to car-sharing and how as autonomous vehicles develop, the consumer value of participating in these programs increases and the distinction between the programs is diminished.
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