Car-Sharing Benefits from Car Sales Slump

In April 2022, new car sales in Russia slumped by 80% from February’s level, even a greater fall than the Covid-related sales crash in 2020.

However, the picture is different this time. Two years ago, dealer outlets, packed out with cars ready for sale, were missing consumers. This year, showrooms are effectively empty because of the trade restrictions and international isolation of Russia evoked by its invasion in the Ukraine. “The market sentiment is very interesting,” CEO of Autostat, Sergey Tselikov wrote in car dealers’ online chat. “There’s nothing to sell. It’s unclear if car brands that suspended sales will return and what happens to their dealers [while they’re out].” These days, Russian consumers face the severest deficit of cars since the fall of the USSR, which saw vehicles soar. It hit 77% of car buyers, according to this April’s survey by Rosgosstrakh and Otkritie, who had to either postpone a purchase, take a loan or buy a cheaper car than was initially planned.

There is a bright side in this gloom outlook. The issues with owning a vehicle can shift people’s mindsets towards shared-use cars. During 2020’s lockdowns, car-sharing soared on the back of the demand for hygiene safety higher than that offered by taxis or public transport. This year, the cause is different, yet, Moscow’s department of transport suggests that the use of car-sharing can further grow by 20% to 30%. “We see a potential for growth,” confirmed Elena Muradova, managing partner and co-founder of BelkaCar. “The saturation point hasn’t been reached yet.”

However, the tendency needs time to gain strength. These days, the demand for shared-use cars is growing in accordance with a regular seasonal curve. “[One change is,] we can talk about a slight reduction of the churn rate,” she said. “However, in this, our own efforts in customer retention can play a part bigger than the general trend of higher uptake.” In car subscriptions, the tendency is stronger. “In March, the number of customers willing to subscribe to a car doubled from February’s level,” according to the Yandex Press Service.

Challenges in sustaining operations

Currently, car-sharing operators are in a favorable position to private drivers because they continue to get cars under pre-war contracts. For instance, Russia’s fourth largest operator Citydrive reported that it had expanded its fleet from 7,000 to 9,000 vehicles in the first quarter. “Yandex’s subscription service runs as usual,” wrote Yandex. “Several vehicle models are available to consumers and tariffs haven’t been changed so far.”

However, the deficit of cars could hamper the operators in the coming months. For example, Moscow’s DoT estimates that its world-largest shared-use fleet can lose 13,000 of its 30,000 vehicles, those bought in 2019. Formally, this is because of the city’s three-year compulsory limit on the age of shared cars. However, the root cause is the operators’ inability to replace them.

“In 2022, both taxis or car-sharing are influenced by the soared leasing tariffs and a deficit of cars and spare parts,” Muradova said. “Currently, supply chains are disrupted by different factors and it forces the market players to look into alternative ways of sustaining the size of the fleets. Changes are coming in so fast that it’s difficult to plan and make forecasts whether it’s vehicle range, financial terms or anything else,” she said. “We switched to quarterly planning and making flexible tactical choices in order to maintain the currently available amount and quality of offer.”

To help them, Moscow softened its limit on vehicle lifespan to four years and doubled subsidies for vehicle purchase. However, it’s questionable if the measure will work as intended. “Usually, we replace cars at the end of warranty,” Elena Muradova said. It means that many vehicle models popular in car-sharing reach the exhaust limit in around three years. A risk exists that wear-worn cars will put off service users and increase maintenance expenses at companies. Furthermore, if the situation results in a flow of new users, the existing offer of cars will not help the surplus demand. After all, Russian operators need to be able to update and amass their fleets. “So, we’re now looking closely into [alternative models] available in the local market,” Elena Muradova said.

Muradova believes that most operators don’t even consider compromising service quality even for the sake of increasing their share of the mobility market: “Issues with spare parts can force us to exclude some of the [popular] models. Nevertheless, we will always stick to automakers’ recommendations in regards to vehicles’ durability.” Yandex will continue to offer subscription services, it wrote: “Our main goal is to keep tariffs at bay as long as possible and offer service users a range of vehicles in various segments.”

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