Automakers Not Just Selling, But Sharing

by Susan J. Aluise | April 10, 2013 8:58 am

Millennials must not like car salesmen.

Manufacturers like Ford (NYSE:F[1]), General Motors (NYSE:GM[2]), Fiat’s (PINK:FIATY[3]) Chrysler and Toyota (NYSE:TM[4]) are struggling to sell vehicles to younger consumers, with members of the 18-34 age group significantly less likely to purchase a vehicle than prior generations were.

The Great Recession hit millennials harder than most groups, so they’re naturally more hesitant to drop a five-figure check for a depreciating asset. They also seem to view cars as a means to an end, not an extension of their identity — which throws a wrench in the way cars have been marketed for decades.

Automakers face an even greater challenge now thanks to car-sharing programs that allow consumers to rent vehicles for very short time frames (hours instead of days). This trend first hit Europe and is now gaining steam in the U.S. through companies like Zipcar.

As of last October, car sharing was available in 27 countries and on five continents, according to the Transportation Sustainability Research Center’s “Innovative Mobility Carsharing Outlook.”[5] North America is the largest region with an estimated total of 908,584 members and a fleet of 15,795.

So far, Zipcar has been the most successful player on the field — and soon will gain even more market power. In January, it announced plans to merge with Avis Budget Group (NASDAQ:CAR[6]) in a deal valued at $500 million. Now, rental rivals Hertz (NYSE:HTZ[7]) and privately held Enterprise are beginning to encroach on the self-service company’s hourly rental market.

Given these trends, what can automakers do to defend their turf?

As the old line goes: “If you can’t beat ’em, join ’em.” With that in mind, here’s a breakdown of some of the initiatives currently underway:

• Ford: Last month, Ford launched a new program with Ford of Germany, its German dealer network, and DB Rent GmbH, parent of the Flinkster car-sharing service. The new car-sharing service, dubbed FORD2GO, debuts in the wake of a 6,000-person survey[8] that found 56% of Europeans would consider car-sharing.
• General Motors: GM is facilitating peer-to-peer car sharing by making its OnStar application programming interface available to the peer-to-peer car-sharing service RelayRides. That will allow individual owners who subscribe to the satellite service the ability to easily rent out their vehicles to other users.
• Chrysler: Chrysler is working with Hertz’s On Demand car-sharing service to offer the Fiat 500 Sport. The Fiat unit also has an interesting reverse play in the space. Under its new e-pass system, the automaker will give 12 free rental days a year to buyers of its electric 2013 Fiat 500e. The program, which aims to ease consumers’ anxiety over the range of electric vehicles, includes gas-powered cars like the Dodge Dart, Chrysler 200 and Fiat 500.
• Daimler AG: Daimler (PINK:DDAIF[9]) launched Car2Go back in 2008 in Ulm, Germany. Since then, the company has expanded its service to a total of 18 cities worldwide — including Washington, D.C., San Diego, Seattle, Austin and Portland, Ore. The vehicles are all two-seat microcars from Daimler’s Smart Automobile unit.
• Toyota: Last month, the Japan-based automaker announced plans to launch an electric vehicle car-sharing program[10] in France next year. The project — part of TM’s ongoing effort to test the market for car-sharing services — will launch the One Mile Mobility Management System. This system is a centralized information technology platform that allows drivers to book cars with their smartphones and connects EV charging stations to the public transit system.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2013/04/automakers-not-just-selling-but-sharing/

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