Telematics and the car-as-service model

Telematics and the car-as-service model

The car is moving from commodity to service. For evidence, consider the largest car-sharing firm, Zipcar, has begun trading on the Nasdaq and DriveNow, a car-sharing service partnership between BMW and rental-car company Sixt, began operation to much fanfare in Munich, with plans to expand. Sharing cars, rather than personal ownership, is a greener option but this industry’s growth is also rooted in shifting social attitudes.
Research indicates that “teenagers and young people no longer look at owning a car as one of their major goals for early life,” says Dominique Bonte, group director for telematics and navigation with ABI Research. Electronic gadgets and a connected lifestyle are gaining ground on autos as status symbols. And practical matters are a factor as well. “In Tokyo, there’s no space to park a car,” Bonte says. “So people are abandoning ownership.”(For more on the car-as-service model, see Telematics and Generation Y: Making the car an iPhone on wheels, Telematics and the socially networked car and Telematics and the socially networked car, Part II.)

As society begins to embrace car sharing, and competition in the market ramps up, effectively leveraging technology and telematics will be key to these businesses’ success.

 

Why technology is key

 

“Obviously, [car sharing] can only work well when you have connected cars,” says Bonte. Potential users need an easy way to locate the nearest available car. As shared fleets transition to electric cars, monitoring battery status will be of essential importance. In October 2011, Paris launched the testing phase of Autolib, a fleet of electric vehicles that can be rented at one station and returned at another, in the model of the city’s popular Velib bicycle service.

Telematic features like remote locking or unlocking via a smartphone are nice to have on personal car, but they become “must-haves” when the car is shared, he notes. In addition, state-of-the-art infotainment and connected entertainment features (Pandora radio, current map and traffic information, even parking availability) that might prove too costly for an individual car owner can be offered in some or all of a shared fleet’s vehicles (perhaps for an additional fee) as an incentive for users and a means to set a car-sharing service apart from competitors, Bonte suggests.

From the corporate perspective, telematics systems help monitor the health of each vehicle via remote diagnostics, engine failure reports, and maintenance alerts. They also allow the business to keep track of where their cars are parked, how much they’re being used, and to where they’re being driven. Based on this information, the service can adjust where it locates its vehicles or the number of vehicles in the fleet to ensure maximum profitability.

This data is also crucial to the sophisticated billing systems necessary for car-sharing services. Pricing may be based on time, miles driven, fuel consumed, or some combination of these, among other factors. (For more on billing, see Telematics and the search for a universal data plan.) Bonte even suggests that driving information, like what’s now being gathered telematically for usage-based insurance (UBI), could be used by car-sharing services. (For exclusive telematics business analysis and insight on UBI, check out TU’s Smart Vehicle Technology: The Future of Insurance Telematics.)

“There’s no better segment for telematics than car sharing,” says Bonte. “Everything comes together to make a convenient and efficient operation for the consumer and the fleet owner.”

 

Car sharing hits the road

 

A prescient 2006 report on worldwide car-sharing growth, conducted by Susan A. Shaheen and Adam P. Cohen for California PATH (Partners for Advanced Transportation Technology) at University of California, Berkeley, also identified the importance of technology to car sharing. “The authors forecast continued technological advancement where car-sharing currently exists,” they wrote. Specifically, they anticipated more open-ended bookings, instant access even without a reservation, one-way rentals and the ability to return a vehicle at a different location, satellite radio, pre-paid usage cards, and interoperability. Most of these are features found among the car-sharing services on the market today.

Zipcar—which acquired London’s StreetCar and now boasts more than 560,000 members and more than 8,000 cars in their fleets throughout at least 60 cities in the US, Canada, and UK—is the current car-sharing leader, according to company reports. Their system allows for reservations to be made minutes or up to a year in advance, and this can be done anytime online, by phone, or via a mobile device. Cars in a variety of makes and models are kept in specially designated lots, and using their Zipcard, members unlock the door of the vehicle they’ve chosen and go. The car must be returned to the same Zipcar lot when use is concluded.

DriveNow, which is currently operating in Munich and Berlin, has thus far distinguished itself with a fleet of exclusively BMW 1 and Mini vehicles, as well as an innovative tracking system that allows customers to leave the cars parked anywhere in the city when they’re finished. Those interested in a DriveNow vehicle simply log on via computer or smartphone to find the nearest one available. (Reservations may also be made in advance.) When the vehicle is located, a special chip implanted in the user’s driver’s license unlocks the door, a tablet computer mounted on the dash allows system login, and a push button starts the car.

 

Changing concepts of car ownership

 

DriveNow is designed as an “innovative mobility service” that will establish BMW as more than an auto manufacturer, reported the BMW blog prior to the service’s launch. Ian Robertson, a board member of the BMW AG for sales and marketing, explained that demand for flexible mobility is rising, particularly in cities. “We are aiming to launch a profitable new line of business whileat the same time introducing potential new customers to our brands,” he says.

And according to ABI’s Bonte, they’re wise to do so. “This changing concept of car ownership has wide repercussions on how car makers need to look at their business,” he says. He remains skeptical as to whether BMW really intends to build a business out of car sharing, but gives them kudos for reshaping their image to pique the interest of younger drivers. “One way or another, [car sharing] will hurt car sales,” he says. So getting involved can’t be an easy choice for car makers. “But better to be part of it than left out of it,” says Bonte. “We’ll see if auto OEMs are following their example.”

Jessica Royer Ocken is a regular contributor to TU.

For all the latest telematics trends, visit Consumer Telematics Show 2012 on Jan. 9, 2012 in Las Vegas, V2X Safety & Mobility 2012 USA on March 20-21 in Novi, MI, Content & Apps for Automotive 2012 on April 18-19 in Germany, and Telematics Detroit 2012 on June 6-7, 2012.

For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report, Human Machine Interface Technologiesand Smart Vehicle Technology: The Future of Insurance Telematics.


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