The announcement from Stellantis that they plan to sell the Free2Move car-sharing business marks the end of an era for manufacturers’ looking to profit from a supposed shift in consumer behaviour from ownership to use.
Free2Move itself includes the former mobility businesses of BMW (DriveNow) and Mercedes (car2go), which were initially merged in 2019 to form ShareNow and then acquired by Stellantis in 2022.
Other OEMs also had a go at similar car by the hour or km schemes including GM with Maven and Renault with Zity, whilst many others tried flexible subscription schemes, most of which have been cancelled or significantly restricted.
As with agency and some other bandwagons that manufacturers have jumped on, there is a legitimate opportunity there, but the scale was exaggerated, and the manufacturers were arguably not best-placed to serve this market.
Beyond the prospect of a hopefully profitable business, the manufacturers were attracted by the opportunity to build direct long-term relationships with consumers, a captive market into which to sell excess production, and the defensive role this would play in the event that consumers did move to usership on the scale that some projected.
On the positive side, they had the scale to operate nationally and internationally allowing a seamless proposition to customers who could pick up a car wherever they were travelling, using the same subscription in a seamless manner.
At first glance, their relationships with dealers should have given them an infrastructure that could be leveraged for local support, but I’m not aware of examples of this, and the nature of car-sharing schemes is that the users want the cars to be convenient.
That means at airports, stations, major business centres and close to their homes, not a dealer alley on the edge of the town.
There is also a huge difference in the ‘drumbeat’ of a car-sharing business compared to that of a manufacturer – potentially multiple discrete transactions per customer weekly, compared to a monthly or quarterly wholesale to dealers – a similar challenge to that faced by manufacturers becoming retailers under agency.
As a result, the car-sharing businesses of the manufacturers have evolved into largely standalone businesses with few synergies with either their parent or the other partners they work with.
This inevitably drives up costs, and it is notable that the buyer of Free2Move, a turnaround specialist called Mutares, has identified “clear potential for operational improvement following an intended carve-out from Stellantis”.
Whether this will be enough to set it on a path to long-term viability is still open to question however. Other large-scale independent operators like Zipcar struggled for many years, before they were acquired by Avis Budget, but they remain chronically loss-making.
ICDP has looked at car-sharing over the years, and our observation is that whilst there is a customer segment who favour a single operator across multiple destinations, the most successful and durable schemes are local, focused on gaining a higher penetration in that market rather than trying to provide a universal service with variable uptake across multiple locations.
Penetration is key as financial performance of a car-sharing scheme is tightly linked to vehicle utilisation. This where the real challenge is in satisfying a need that undoubtedly exists with the commercial need for a viable return.
From the point of view of the car-sharing customer, their perception is that if they only use a car for an hour a day, then logically the cost should only equate to one twenty-fourth of having their own car. But to switch to car-sharing from ownership they are comparing the convenience of both options – a car outside their home or workplace versus a walk to a car-share parking location.
That drives network density, with more locations, each with fewer cars. Another dimension of convenience is availability at the times when the user needs them, and it is not a surprise that their needs cluster around typical commuting hours, and times when people are typically going out for entertainment in the evening.
The most successful locations are those that combine demand from different customer segments with different demand patterns that at least in part complement each other.
That will still leave demand peaks which drive the required fleet size up, and the utilisation down, but no customer is prepared to pay for the unutilised time of cars, even though this is the inevitable consequence of good availability.
Unless car-sharing is seen as an extension of the public transport system rather than an alternative to individual car ownership, it will remain more of a social enterprise than a commercial venture.
Coming back then to Stellantis and other manufacturers who have abandoned car-sharing, they are retreating to the business that has shaped them – designing and manufacturing great product and working with partners to deliver the personalised sales, aftersales – and mobility – services that they want.
They lose the convenience of a large managed fleet which they can use to absorb and then progressively release excess production, and they lose the direct customer connection that they all crave, but there is a lot to be said for following the old expression (in English at least) of sticking to your knitting.
