Shared commute again was under the spotlight in China

In early August, a batch of brand new BMW 1-series sedans showed on the streets of Shenyang. These luxury vehicles, equipped with Wifi connection, facial recognition, smart voice assistant, are shared cars which cost users only 1.5RMB per kilometer. Though it turned out that BMW Brilliance Automobile or BMW China were not behind this, luxury shared cars became a hot topic nonetheless.

On top of shared BMWs, another car-sharing company rolled out brand new Audi A3 three-box configuration cars with special marks on the streets of Beijing’s CBD. This company announced it planned to release 2000-3000 such cars to the sharing market. In Russia, a car-sharing company even rolled out Ferrari whose deposit is only $3000.

In recent years, amid growing appeals to ease traffic jams and reduce carbon emissions, car-sharing industry is more promising and draws in vehicle manufacturers and Internet companies.

On August 8, Ministry of Transport and Ministry of Housing and Urban-Rural Development jointly issued Guideline on Sound Development of Micro and Small-Sized Bus. In this guideline, timeshare rental and credit-based management are encouraged. This guideline is interpreted as good news for shared cars’ development.

John Zimmer, co-founder and president of Lyft—a ride sharing company, said: “private car ownership will be outdated. Future urban transportation will be centered on public transportation rather than private cars.” Will consumers buy cars since they can now share luxury cars at a low price? Will the traditional car consumption model be upended?

An irresistible gold mine

Roland Berger, a world-famous management consulting company, estimated that in China’s car-sharing market consumers’ demand is far greater than the market supply and that the market has great potential. By 2018, the potential market capacity of car-sharing industry may reach 1.8 trillion RMB, accounting 2.7% of the GDP in 2015. Understandably, car-makers will not relinquish such a promising gold mine.

Currently, enterprises that have entered the car-sharing market include not only car-makers, such as BMW, Daimler, Beijing Automotive Group, Chery, BYD, Geely, and Lifan, but also operators like “Gofun” affiliated to Shou Qi Group and EVCARD affiliated to SAIC Motor and internet companies like Didi and TOGO.

Although BMW did not manage the shared BMWs that made a hit, it did have some moves in car-sharing industry. Official transportation service by BMW is already under way, according to a report. But there are only 16 cars, including BMW i3 and MINI 5-Door Hatch. In the fourth quarter this year, BMW will deliver 100 electric upgraded version of BMW i3 and release them onto the market of Chengdu through Global Car-sharing Rental Co,. Ltd.

Similar to business model between BMW and other operators on car-sharing cooperation, Volkswagen works with Didi in car-hailing industry and Shou Qi Group in car rental industry.

Daimler, another luxury car-making brand, also attached great importance to the layout of car-sharing industry. It has two car-sharing programs in China: Car2Go and Car2Share.

As a global car-sharing program of Daimler, Car2Go made its debut in Chongqing in April, 2016. Since then, with a total of 400 Smart for two cars, Chongqing has become the only city in China where this program operates. Car2Share provides car rental service for personnel and white collar workers in Beijing, Shanghai, Shenzhen, Guangzhou, and Hangzhou.

Ford did not prioritize private car sharing, rather, it announced it would provide bus service for customers who made an appointment in China to ensure those who are still miles away from the destination can get the nearby subway station by public transportation system.

In car-sharing industry, BAIC BJEV began to establish a timeshare rental platform mainly to serve government trip as early as 2012, including GreenGo, ReadyGo and BeijingGo. In May, it launched “light car-sharing” platform.

Li Yanxia, a deputy research fellow at the Research Center of Transportation Development, said currently over 40 car-sharing companies had launched over 40,000 cars in China.

Gofun announced that it planned to install more than 15,000 vehicles across 20 cities this year other than the 1,100 vehicles in Beijing. EVCARD declared it had already deployed 8,500 “shared cars”. BAIC BJEV estimated that by the end of this year it would add 4,000-5,000 vehicles to the market, reaching a scale of 15,000 vehicles.

“According to a survey conducted by Qi Chen, an affiliate of Dongfeng Nissan, 42% car-owners are willing to give up the car ownership and they want to travel by shared cars.”, said Hong Bin, deputy director of marketing department of Dongfeng Nissan, “now, those who were born in 80s and 90s are the main consumers, their openness to sharing economy is a base for the success of car-sharing model.

Does car-sharing have a future?

“after you pull over your shared car and go to the bathroom near the highway, you may find the car gone”, this ad intended to promote shared cars speaks much of their flaws: will shared cars really bring convenience to users? Does the car-sharing industry bearing heavy assets and long industry chain really have a future?

The high price and parking requirements of shared cars decide they cannot quickly seize the market with enormous products like the shared bikes. First and foremost, purchasing cars is the heaviest burden. As insiders calculated, assuming the price of an BMW is worth 200,000 RMB the cost will be near 100 million RMB if a company deploys 1,000 cars in one city, accounting for about 40% of the total operation cost. Plus, maintenance and parking fees also need a large sum of money, making the cost of car-sharing schemes prohibitively high.

Factors including few shared vehicles, few networks, expensive parking space, and difficulties in returning the cars all add to inconvenience of users. Fixed networks are needed for users to park or return cars.

“We have tried to build networks where shared cars can be returned in other places, but few users showed interest. After all, due to a limited amount of networks, consumers cannot have convenient service. If we build many networks, the operation cost will rise sharply”, said a top-ranking official of an enterprise anonymously.

Apart from the high costs that hinder car-sharing industry, many safety issues in car-sharing operation warrant immediate solution. “the video showing a BMW drifting was uploaded to the Internet just after the shared BMWs were available. This will not only bring loss to operators but also create potential safety issues”, said a senior executive of a car-sharing platform.

Also, he said problems in bike-sharing schemes such as bikes being illegally parked, misplaced or sabotaged and bikes occupying lanes might also exist in the car-sharing industry, calling for the operator’s wisdom and related legislations. Some demands can only be met after covering a long way.

This article originally appeared in The Economic Observer and was translated by Pandaily.

Click here to read the original Chinese article.