Why Car Sharing Fails to Disrupt Car Rental

Introduction

Car sharing services have been gaining popularity, especially in densely populated urban areas where managing a personal car can be challenging. However, despite their growing presence, car sharing has not yet significantly impacted the traditional car rental market. This article aims to explore the reasons behind this phenomenon.

Spare Test vs. Rental Car

Commercial car sharing services such as Car2Go and DriveNow often compete with taxis and public transport. For instance, in Germany, renting a DriveNow car to Munich Airport costs about half the fare of a taxi, while public transport's express train costs only half the cost of DriveNow.

An ordinary rental car typically comes into play when I need a car for a longer duration. Car2Go and DriveNow have adapted to offer short-term rentals, focusing on short distances and reducing the need for daily rates. However, the dense network of available cars required for such a service poses its own challenges. For example, if I rent a car for a weekend, it might not be available for others due to the limited duration of rental.

Car Distribution and User Responsibility

Car sharing services rely on users to distribute their cars properly, but this approach has its limitations. If I return a car late at night, there's no guarantee that another car will be available for me. In contrast, car rental companies ensure a better distribution of their cars, a responsibility that users cannot shoulder alone.

In Germany, notable car sharing ventures include DriveNow, a joint project between BMW and Sixt, and Car2Go, a partnership between Daimler and Europcar. These collaborations demonstrate the car rental industry's readiness to embrace shared mobility options.

Revenue Stream Diversity

Most classical car rental companies' revenue streams go beyond traditional car rental services. A significant portion of their income comes from buying and selling cars. These companies acquire cars at a discount, use them for less than 200 days, and then sell them to private buyers. This strategy allows them to remain competitive and flexible in the sharing economy.

Why Rental Retains Its Foothold

Several factors contribute to the persistence of traditional car rental services in the face of car sharing:

Guaranteed Standard: With rental, you are guaranteed a certain minimal standard in terms of the car's condition, pricing, and service experience. Hassle-Free: Rental services typically provide a hassle-free experience, including a clear avenue of complaint in case of any issues.

While car sharing can be convenient for short-term needs, traditional rental services offer a more reliable and expansive solution, especially for longer-term requirements or business-related needs.

Car Sharing and Conventional Rentals: A Complementary Solution?

Some rental car companies have also started offering short-term hourly rentals, such as Hertz, Avis, and U-Haul. This indicates that there could be an evolving relationship between traditional rental services and car sharing. Both options serve different markets, catering to the diverse needs of consumers.

It seems that despite the popularity and convenience of car sharing, traditional car rental services have managed to maintain their market position by offering a different set of advantages. In the ongoing debate between these two services, it seems that they may be more complementary than competitive.