Drive Now and Car2Go cars
Skepticism about the business model is increasing.
(Photo: obs / Accor Hotellerie Deutschland GmbH)
Düsseldorf, Munich It was not a year ago that the motto was “The sky is the limit”. The bosses of that time BMW and Daimler. Harald Kruger and Dieter Zetsche, announced the merger of their mobility services Car2go and DriveNow. In the still young sharing economy, they wanted to be revolutionaries. A billion euros should be invested. But with the bosses, the creed also changed. Profitability is now a priority. The consequence: full braking.
Do in North America Daimler-Boss Ola Källenius and BMW-Boss Oliver Zipse the shared sharing platform Share Now will close at the end of February 2020. A million customers from New York, Vancouver or Washington have to look for new suppliers, 3500 vehicles are withdrawn from the market. The networks are being thinned out even in the core region of Europe: the locations in Brussels, Florence and London with around 1,000 vehicles will also be abandoned. One has to struggle with “extremely difficult realities”, it is said cryptically.
Car2go had already left many cities in Germany and abroad before the merger. Other providers are also withdrawing. General Motors stamped its Maven service in eight cities in North America. ford completely abandoned his shuttle service Chariot. Car Unity (Opel), Multicity (Citroën) and Mazda have also stopped working.
The string concerts are not surprising for the automotive industry expert Ferdinand Dudenhöffer. “The high hopes in car sharing have not been fulfilled. It was a niche, it is a niche and it will remain a niche, ”he told the Handelsblatt. Above all, the new mobility services will not replace private cars.
Some figures are impressive: According to their own statements, 90 million customers have won Daimler and BMW for their mobility services. The two car groups are active in 1,300 cities worldwide with car sharing, ride hailing (taxi apps), parking and charging services. Free Now (formerly Mytaxi) alone has over two billion euros in revenue on its platforms and has already arranged 300 million trips.
Even in the car lover Germany According to the industry association, 2.5 million people now share a car in car sharing. 20,000 vehicles are now ready to board in German cities. The problem: Nobody makes money from it.
The “dynamic growth course”, which the domestic market leader duo BMW and Daimler announced only at the beginning of the week, did little to change this, and made clear by referring to the “next stage of expansion” of their joint venture that this naturally only meant “profitable growth”. This explains the withdrawal from North America announced shortly afterwards and the concentration on Europe.
The strategic shift is also a consequence of the change in management in both companies. Daimler CEO Dieter Zetsche was replaced by Ole Källenius. Oliver Zipse now leads BMW instead of Harald Krüger. And both CEOs agree, now the core business has to be stabilized – and that means automotive engineering.
The competitors are big partners when it comes to mobility platforms. They announced the merger on February 22 of this year. Five joint ventures were founded under the “Your Now” umbrella brand – for car sharing, rideshare, parking, electric charging stations and travel planning apps. “Together we are stronger,” exulted ex-BMW boss Krüger at the time. In the meantime, these activities have also been reduced to just three business areas.
Loss-making marginal transactions and experiments are sorted out or reduced. The most recent example of this is that the shared car sharing service Share Now is giving up its business in North America. The end is also in London, Brussels and Florence. The portfolio adjustment is significant, the service will only be represented in 18 cities in the future. For comparison: When Share Now started in February, it was still active in 30 major cities around the world.
“Overall, we hyped the topic of shared mobility too much. Even the largest providers have significant problems, ”said Daimler corporate circles. Now priority is given, especially since the desired scaling cannot be realized as easily and quickly as hoped. The reason: The regulations differ from region to region. Every city and community has to be wrestled individually with a high level of personnel. In addition, thousands of vehicles need to be serviced, refueled and relocated during car sharing. It only becomes a business model when the cars are constantly on the move.
Daimler circles fear that the joint ventures around Your Now could become the “new Smart”, alluding to the small car subsidiary with which the people of Stuttgart have been burning money for two decades.
However, Daimler does not want to get out entirely of mobility services. “It is important to have a connection,” said Daimler CFO Harald Wilhelm to investors in London in mid-November. In order to further scale the business, however, one is “open to further partners,” said Wilhelm. In plain language, this means that Daimler and BMW are looking for financiers to build up the still lossy mobility business. It can also be financial investors, it is said in corporate circles.
Analogy to the aircraft industry
Passé is also the vision of the former BMW boss Krüger, who saw the germ of the future core business in the mobility services. BMW bought the drive-now shares from the car rental company for 200 million euros Sixtto then bring the carsharer into the large alliance with Daimler. While Sixt the expansion in the United States did not want to go along from the beginning, Krüger announced the goal of binding 100 million customers to the car manufacturer in the medium term.
Successor Zipse set the course with an analogy to the aircraft industry. BMW is an “aircraft manufacturer and not an airline,” says Zipse. BMW was not “precise” enough here in the past, the new BMW boss said. Internally, the message is understood, car manufacturing is moving back to the center, mobility services must quickly become profitable if they want to have a future at BMW.
The strategic turn of BMW and Daimler contributes to a debate that automotive professor Ferdinand Dudenhöffer sparked a study a few weeks ago. Headline: “The great disillusionment”. In his ten-year balance sheet, Dudenhöffer, head of the CAR Center Automotive Research at the University of Duisburg-Essen, comes to the conclusion that the share of sharing cars in the German car fleet despite growth is barely noticeable 0.04 percent.
In any case, Dudenhöffer suspects many file corpses among the approximately 2.46 million authorized drivers of sharing providers, possibly attracted by bonuses or incentives when registering. In other words, the large numbers of sharing services say nothing.
The industry couldn’t stand that. Carsharing has “proven its potential as an instrument of the traffic revolution long ago,” counters Gunnar Nehrke, managing director of the federal association of carsharing. Private car ownership and personal company cars have been massively promoted politically in the past 50 years and advertised by the industry with enormous marketing budgets. Of course that had an effect, Nehrke notes.
For many Germans, owning a car has become a mobility paradigm par excellence. And directed directly against Dudenhöffer: “It is a little unbelievable that a scientist close to the automobile manufacturers like Ferdinand Dudenhöffer is now surprised by this.”
Skepticism about sharing business models also spread other sources. Analysts of the German bank are of the opinion that “individual mobility is part of the DNA of free societies”. There are many reasons for the increase in transport performance. However, individual mobility is one of the basic human needs, “for which there is a high willingness to pay”.
An Avis Budget Mobility Report comes to the conclusion that it is important for 80 percent of Germans to own a car. A Yougov survey for the Handelsblatt on Thursday fits this: 86 percent of those surveyed do not use car sharing at all. According to the Avis report, there is only one important reason for the Germans (58 percent) to part with their beloved sheet metal anyway: sharing offers should be cheaper.
However, car sharing is far from being written off. Alexander Sixt, Junior boss of the Munich car rental company of the same name, recently told the Handelsblatt: “We do not see classic free float car sharing as an opportunity to make significant money because the market is simply too small.” Sixt is also convinced that only the combination of classic car rental business is possible and car sharing “makes economic sense”. Perhaps this will turn business into shared mobility.
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