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Car-Sharing: Where and How It Succeeds 2.6 Market Development The early growth of car-sharing in Europe and North America was based on the neighborhood residential model. In other words, the primary customers were individual households, with cars located in primarily residential or mixed-use areas. The residential market still forms the largest market for many operators. However, operators are experimenting with a range of different business models, some of which have the potential to yield much greater revenue. At the same time, innovative services such as one-way reservations have been explored, which have the potential to reduce the "convenience gap" between car-sharing and car ownership. Product Life Cycle Wagner (2005; personal communication) identifies several distinct car-shar- ing "products." His analysis in Exhibit 2-13 categorizes them in two ways: their historical development and the degree to which they are profitable. The products on the left of the chart, such as neighborhood car-sharing and alternative fuel vehicles, were the earliest to be introduced. Those to the right, such as Public Car (which would allow non-members to access car-sharing vehicles with a smart card such as a credit card), represent potential future developments. The other axis represents net revenue, with the products towards the top of the chart being the most profitable ventures. Business car-sharing and fleet-sharing, for example, have generated the most net revenue, and are likely to become even more profitable in the future. The profitability of neighborhood car-sharing is also expected to increase. Alternative fuel vehicles, in contrast, have generally been loss-making ventures (or covered through external subsidies). While this analysis is based on the European experience, it bears a strong resemblance to that in North America. Several products worth particular mention are discussed individually below. Page 2-27

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Car-Sharing: Where and How It Succeeds Exhibit 2-13 Car-Sharing Product Life Cycle 1990-2005 Revenue Profitable Fleet Sharing Business Car-sharing via via Employer Developer + vi a nati onal + Sites (housing) Public Neighborhood Transport Car-Sharing Shop in via Local / Shop / Revenue-neutral Regional Rail Link License Transport Public Car CashCar - Alternative Loss-making Fuel Vehicles up to 2005 n ea r f u t ur e time Source: Adapted from Wagner (2005). Page September 2005 2-28

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Car-Sharing: Where and How It Succeeds Business Car-Sharing This concept is discussed from the perspective of employer and business partners in Chapter 5. From an operator's point of view, business car-shar- ing can be one of the most attractive market segments, particularly where there is also a residential market that will use the cars in the evenings and weekends. For example, Flexcar's expansion in Southern California has tar- geted the business sector. Rather than needing to sign up every individual, a single "sale" to a company brings in many individual users, some of who may also join for personal use. Fleet Sharing Fleet sharing is a variant of business car-sharing, which provides an organiza- tion with exclusive use of car-sharing vehicles at particular times. (In contrast, most business car-sharing members use the regular car-sharing network in the same way as other members.) For example, the City of Berkeley has ex- clusive use of four City CarShare vehicles during the working day (Chapter 5). The Postal Service in Switzerland uses 6,000 cars between 4 AM and 11 AM, and is working to substitute 10% of this fleet with car-sharing vehicles (Wagner, personal communication). Fleet sharing provides the customer with the assurance that it will have access to the vehicles, and is financially advantageous for the operator since it guarantees a revenue stream. Developers This market includes residential, commercial and mixed-use properties and is discussed in detail in Chapter 5. From the operator's perspective, this approach provides both parking and, perhaps more importantly, ready access to tenants to market the service, particularly if membership fees are included. There is also the prospect of developer subsidies helping to make car-sharing work in more peripheral locations. One major US opera- tor believes that this sector is the next large growth market in car-sharing, following business car-sharing. Several operators have recently had great success in negotiating agreements with developers and planning bodies. Due to the nature of the development pipeline, however, it may take several years before these are completed. Lease Sharing Under this concept, an individual leases a vehicle, but makes it available to other car-sharing members when not needed (for example, when travel- ing away from home), via the common reservation system. Depending on utilization, the member receives a rebate on lease costs. Page 2-29

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Chapter 2 State of the Practice The largest trial of lease sharing was the "Cash Car" project in Germany from 1998 to 2003. This did not continue after the pilot, largely due to transactional costs such as cleaning the vehicle (Wagner, personal com- munication). However, it may have considerable future potential in more peripheral neighborhoods, where a "full-time" car-sharing vehicle may not be warranted. A much smaller number of members perhaps one to four are needed to make lease-sharing economically viable, compared to 25 or more per vehicle for car-sharing. Through restricting usage to a small num- ber of users in a "cell" (such as a gated community or apartment building), members could also personalize the vehicle with their own Kleenex, CDs and so on, Wagner suggests. Innovative Services The other aspect of market development relates to the provision of innova- tive services. All large car-sharing organizations in North America at pres- ent offer only two-way trips for fixed-period reservations. In other words, the user must reserve a car, drop off the vehicle at the same location where it was picked up, and specify an end time for the reservation (which often may be extended, if the car is available). There are several practical and economic reasons for this: It allows the reservations process to function, since the system knows when and where a car will be available. It avoids staff time in "shuttling" cars from one location to another to address distribution imbalances. It enables members to easily find the car and know where it is located. It allows a single parking space to be allocated for each car at its "home" location. In contrast, systems that allow for one-way trips need around twice as many reserved parking spaces as vehicles, in order to function optimally (Nakayama, Yamamoto & Kitamura, 2002). Alternatively, they need to be located in places that have a reserve of free parking (Schwieger, 2004); however, as discussed in Chapter 3, such plans are unlikely to provide the most fertile ground for car-sharing. These restrictions, on the other hand, also serve to reduce the utility of car- sharing and make it less attractive to potential members. During the focus groups conducted for this study (described in Chapter 3), one of the main disadvantages of car-sharing was considered to be the lack of a one-way trip option. In addition, many disliked the "clock-watching" involved with car- Page September 2005 2-30

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Car-Sharing: Where and How It Succeeds sharing. They said that, if their plans changed or they got stuck in traffic, they were stressed over thinking "I've got to get that car back." It reduces their level of spontaneity, participants considered. Three specific services have been explored, which can be implemented singly or in combination, as ways to overcome these barriers: Instant access. Members can go directly to an available vehicle, without needing to make a reservation. (Most operators already have an approximation of this convenience, through allowing reservations by phone or internet within five minutes of the start time.) Open-ended reservations. Members schedule the pick-up time but can keep the car for as long as needed. One-way trips. Members can drop the car off at a different car- sharing location. Floating cars, an extension of the one-way trip concept, allows members to drop the car off anywhere within a defined zone. This is similar to the free "public-use bicycle" pro- grams discussed earlier in Recent Growth, Section 2.2. One-way trips and open-ended reservations have been implemented, but only in research pilot programs where financial considerations are less im- portant. For example, UC-Riverside's IntelliShare program provides vehicles that can be driven between five stations on and around campus. When mak- ing an (optional) reservation or picking up a vehicle, the computer system asks the user for the station where the vehicle will be dropped off (Barth, Todd & Xue, 2004). Other examples include the French Praxitele demonstra- tion, which ran from 1997-1999, and a pilot with StattAuto in Berlin. In most cases, about one in ten trips requires a staff member to relocate the vehicle (Barth & Todd, 2001; Schwieger, 2004). The Berlin project was based within an existing car-sharing fleet, allowing the impacts to be studied and compared to more conventional car-sharing operations. Vehicle utilization increased by 23% with the open-ended return system, and 15% of reservations were one-way trips. However, the increased utilization did not lead to gains in revenue, since many users simply kept the vehicle once they had reached the daily rate cap, rather than driving it more. One-way and open-ended reservations were seen by members as "good to have," rather than as essential features of a car-sharing program (Schwieger, 2004). Page 2-31