The Carsharing industry has shown a growth rate of 29.4% in revenue with the reopening of economic activities in Europe, after the COVID-19 pandemic. Revenue in the EU-27 car sharing market is projected to reach €2,328 million in 2021, with 11.7 million users.
Drivers of the industry growth are the strict government regulations to curb vehicular emissions. The smartphone technology and GPS tracking; the broad range of business models in the sharing economy; and the citizens trust in sustainable alternatives which, in turn, are more cost effective than car ownership.
The following steps will be analyzing through Porter’s forces the car sharing industry. With a focus on free-floating business models, so that profitability and degree of rivalry can be estimated.
Understanding the Carsharing Industry’s Suppliers
There are two major suppliers: fleet owners and system developers. Their role has recently changed to a knowledge-based model where the technology and the knowhow acquired; related to its prices, are the main keys to find a spot in this industry.
For the fleet owners, the constant market movement into electric and high technology mobility; makes these companies increase their innovation capacity in order to target this new service industry. In addition, the high level of competition among them is important because they are powerful automotive brands, such as BMW, Fiat and Toyota.
Their financial resources allow them to move prices while still making substantial improvements in the vehicles. For the system developers, due to the great number of companies that provide the similar type of service. Even though the level of technology is high, the number of offers in the market does not put them in a favorable position during a negotiation.
The Impact on Customers
Car sharing provides ease of transfer to other transport modes, enhances the engagement in activities at urban areas, and reduces private car use.
The users are a socio-demographic specific group: car sharing is particularly attractive for younger people (average age 38); who are open to new mobility concepts and want to reduce the impact on the environment by reducing traffic congestion and improving air quality.
Research shows that perceived compatibility with daily life is the most important factor related to the attitudes towards carsharing. Customers prefer flexibility, leading them to pay more. In addition, these services are cost effective; users avoid high fixed costs of automobile ownership and car sharing firms offer a menu of pricing plans, such as flat-rate and pay-per-use pricing.
Successful sharing providers are those who offer high availability, transparent pricing, and fleet variety.
Rivalry in the Carsharing Sector
In Europe there are car sharing providers operating only in one country, but the most powerful, with significant monetary capital, are those active in several countries. These ones have more power to reduce prices and improve their fleet.
Increasing competition in the industry comes from the wide range of available services, such as free-floating, stationary, or peer-to-peer car sharing.
In addition, automakers locked in a market of mature products; increasingly face external pressures from governmental institutions because of pollutants. The way of managing end-of-life vehicles, and the need to reduce using natural resources in production. As a result, the major free-floating operators are owned by OEMs (Original Equipment Manufacturers) and rental companies; car2go by Daimler, Ubeeqo by Europcar, Zipcar by Avis, DriveNow as a joint venture between BMW and Sixt.
The degree of rivalry in the European car sharing industry is high. Since the industry is still growing, the number of competitors is high and they compete on the affordability of the service. The availability of cars for the consumers; the turnover rate (users per car), and above all, quality of service, security, and ease of use within the application.
Entry Risks in the Carsharing Sector
Governments own most of the land where these vehicles would operate. Final decisions and concessions on whether these companies can enter the market or not remain principally on government policies. Overall, European government policies favor the access of free-floating micro mobility solution. Regulation exists for favoring the car ownership decline and focusing on more environmental solutions in the city centers. Governments granting parking facilities and access to congested city center areas are key aspects favoring the access of companies to the industry.
However, there are high capital requirements as a consequence of needing a large fleet of vehicles available. Fleets of cars are more expensive than other services which use scooters or bikes. Nevertheless, these barriers are being easily overcome with the integration in the carsharing industry of established car manufacturers; or traditional rental companies backing their own car sharing mobility systems or as suppliers.
Threat of Substitutes in the Carsharing Sector
Many European cities report that customer satisfaction and infrastructure are steadily improving in public transportation, primarily for inexpensiveness and reliability. Therefore, buses, subway, trams, and high-speed trains are a threat of substitute to the car sharing industry.
Moreover, free-floating car sharing models compete with taxis and new mobility providers such as Uber. Their flexibility in operating 24 hours a day and providing door to door service; are highly valued especially by tourists, people with disabilities, and in cases of emergency. On the other hand, car ownership might be an alternative to car sharing due to normative beliefs.
For shorter distance trips, motorcycles, bicycles, mopeds and scooters are also available as substitutes in urban areas. This could depend on the purpose of the trip, the number of passengers, and the comfortability level of the driver.
The last substitute, for extremely short distances, would be walking.
Conclusions: High Rivalry and Moderate Profit
According to the analysis, the degree of rivalry in the European car sharing industry is high. Since the industry is still growing, the number of competitors is high and they compete on the affordability of the service. The availability of cars for the consumers, the turnover rate (users per car); and above all, quality of service, security, and ease of use within the application.
Due to the effects of the pandemic, the profitability is much lower compared to previous years. Even so, there is huge potential for profit in the following years. Technological progress allows companies to make their applications more efficient and provide better service to customers.
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