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Car Sharing Could Help, Hurt Auto Sales

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Some people think car collectivism is up and coming. But the auto industry prefers that individuals, not groups, buy vehicles.

I saw a Zipcar for the first time. It was something of a discovery for me, like a birdwatcher spotting a rare crested Asian ibis. Maybe I’m just looking for Zipcars in the wrong places. I live in metro Detroit, where people like to drive their own vehicles, not share them with others.

The Zipcar I espied was in Palo Alto, CA, the epicenter of the Silicon Valley, a land of luxury cars. When I saw what looked like a parade of Mercedes-Benzes going down a road, I thought it was a car-club caravan.

A local told me otherwise. “It’s not that,” he said. “It’s just that a lot of rich people live here, and they own nice cars. A lot of Mercedes dealerships are located in this region.”

The Zipcar I saw was parked at Stanford University, certainly not on the poor side of town. But don’t expect to see a Zipcar in the executive parking lots of Facebook, Apple, Google or any of the other wildly successful tech businesses that call Silicon Valley home.

Zipcar started 14 years ago on the other side of the country, in Cambridge, MA. Today, the company worldwide has about 800,000 members who can reserve a car online or by phone. They use an access card to unlock the door. The keys are inside.

Some people think this car collectivism is up and coming. That wouldn’t bode well for the auto industry. It prefers that individuals, not groups, buy vehicles. More are sold that way.

“My general feeling is car sharing has room to take off,” Tom Webb, Manheim’s chief economist, tells me at a recent Automotive Resource Network conference in New York.

“It won’t cause zero owners, but it could turn 2-vehicle families into 1-vehicle families,” he says.

That notion could turn the stomachs of automakers and dealers.

Auto sales are getting better, but they’d really rock if people bought cars in multiples, says Citi auto analyst Itay Michaeli.

“The question is not so much whether young persons will buy a car, but whether 35- to 44-year-olds will buy more than one,” he says, citing a diagnostic indicator of a healthy industry.

WardsAuto predicts U.S. light-vehicle sales of 16.2 million this year. Webb doesn’t foresee much of a blast past that, asking “Why do we need more vehicles for fewer miles driven?”

Americans collectively drove about 3 trillion miles (4.8 trillion km) last year. That’s equivalent to about 32,000 trips to the sun. Vehicle use peaked in the U.S. in 2007. It decreased during the recession. Since then, collective driving miles have only nudged up.

Car sharing could negatively affect the auto industry, Michaeli says. Putting it more ominously is George Magliano, a senior economist for IHS Automotive: “There’s a real threat.”

But Mark Fields, Ford’s new CEO, didn’t seem terribly bothered by it while addressing a media gathering at the New York auto show.

Successful business innovators do three things, he says: Understand the world will change, anticipate how that will affect consumers and anticipate their spoken wants and unspoken needs.

Among the innovators he cites is Zipcar. Maybe it’s a case of “If you can’t beat ’em, join ’em.” Fields says Ford long term wants to function not only as an automaker but also as a mobility company, whatever that means.

It’s no surprise the Zipcar I saw was at a university. College towns account for a high number of car-sharing users.

A lot of them are kids not quite ready to own a vehicle. That can change as they get older, have families and enter their peak earning years. I doubt many Stanford grads will stick with Zipcar as a means of transportation. You’ll likely see them at the local Mercedes dealerships.

Despite some dire predictions here and there, car sharing potentially could help car sales by serving as an appetite-stimulating hors d’oeuvre before the entree of ownership arrives.

“Car sharing can get young people interested in the value of owning a car,” Michaeli says.

Discuss this Blog Entry 1

on Jun 12, 2014

I am of the view that car sharing is a good option if done under authentication.

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