Will car ownership eventually die out?

Will car ownership eventually die out?

Will car ownership eventually die out?


In the recent article How the sharing economy is shaking the hotel industry, the sharing economy’s effect on the hotel industry was touched on. In this article, it is the car industry that we look at; a sector that is being equally re-shaped by the sharing economy and effects on car ownership.

Car sharing businesses, such as RelayRides, FlightCar, WhipCar, Liftshare and Zipcar, to name just a few, have enjoyed a great response on both sides of the emerging peer-to-peer model.

On the one hand, car owners are able to turn their vehicles into small-sized businesses, producing income from renting them on a short-term basis.

On the other hand, consumers rent a car based on their needs, for the specific amount of time they require, at locations they find convenient, with less paperwork involved and at a cheaper price.

With this scheme in view, buying cars makes no financial sense any longer, especially to consumers living in cities and areas where public transport is widespread.

Thus, through this effective model, car sharing is not only leading us towards more financial efficiency, but also towards a more environmentally-friendly system where private cars are used if and when really needed.

Car sharing also means that the need to create new goods – cars in this instance – is no longer pressing. People can simply share what already exists; fewer resources are thus used by more people, providing a more sustainable model at a time when resources are becoming scarcer.

So, who is going to turn to more expensive car rental or car seller companies when car sharing is simply more convenient, economical and environmentally-responsible?

In fact, car makers are already losing out in this new paradigm. According to industry analyst Jeremiah Owyang, ‘every car-sharing vehicle reduces car ownership by 9-13 vehicles; a revenue loss of at least $270,000 to an average auto manufacturer.’

This has already triggered some strategic change in the industry. Car manufacturer Toyota, for example, has started offering short-term rentals, while car hire company Avis decided to buy Zipcar, allowing those who don’t need to rent a car an entire day, for instance, to do so for just a few hours.

Ronald Nelson, the CEO of Avis Budget Group, explains: ‘by combining with Zipcar, we will significantly increase our growth potential, both in the United States and internationally, and will position our company to better serve a greater variety of consumer and commercial transportation needs. We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company.’

As car sharing businesses mushroom, the traditional car industry is forced to change. With less people buying and more people renting on a short-term basis, car companies that circumvent the opportunities afforded by social media and the sharing economy will gradually lose out.


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