07/02/2020

Does B2B Car Sharing Have a Future? Alex Thibault of Vulog Thinks So

Source: Fleet Management Weekly

It’s a tough time for the business-to-business car sharing industry. Even before the COVID-19 pandemic chilled the market, the by-the-hour rental business was suffering. In February, Share Now, born by the merger of BMW’s and Daimler-Benz’ car sharing divisions and operating as Car2Go, closed its doors in the U.S. and Canada, after exiting all cities in Europe except Brussels, Florence and London last December. Then, in April, GM, announced that it was shutting down Maven, its car sharing division, citing as its reasons the pandemic’s effect on demand and that the business was “not profitable.”

Alex Thibault is vice president of Vulog and general manager of its North American operations. Vulog is the leading maker of car sharing platform technology and counts some of the biggest names in the ride-hailing and rental car companies in the world. In this interview with FMW, Thibault comments on the state of the business-to-business, or B2B, car sharing business and the broader car sharing industry as well.

Why have so many car sharing ventures in North America shut down or pared back over the last year or two?

When launching a mobility service, each entity has their own objectives, but most companies want to position themselves for the future of mobility by offering a service that offers a good value proposition in today’s world. So, for starters, the initial business model needs to be sound and well-priced. Many will get lost right out of the gate by missing the mark there and never manage to get to scale because of it.

For others, many operators have synergies on some level or another that facilitate the launch of a service. Those synergies that existed at one time may disappear for one reason or another and all of a sudden, the strategic venture is no longer as strategic.

And finally, there are many factors that have nothing to do with car sharing that come into play, especially for publicly listed companies that live and die by the quarterly earnings. Management change, where new CEOs are not as attached to a project as their predecessors were or even a changing landscape can all impact an operation. COVID would obviously fit in this last category.

How successful is the car sharing business elsewhere? Is the main market in Europe, and if so, which countries and what kind of car sharing: peer-to-peer [P2P], business to consumer [B2C] or business-to-business?

There are a lot of great B2C car sharing markets in the world. Of course, Europe comes to mind because of the dense cities, higher transit use and municipal administrations that are deploying considerable resources to find ways to optimize mobility in their cities. A city like Madrid, where parking is free for any car sharing operator running electric vehicles, will surely distinguish itself if you compare it to many cities in the US. If you charge an operator $300 per month per car to park, it is much more difficult for an operator to build a compelling value proposition at the right price than if you charge them nothing. So, cities like Madrid, Paris and Berlin all have very developed ecosystems for vehicle sharing.

However, there are other markets that we hear less about, like Russia, with Moscow being perhaps the top city for car sharing on the planet. Canada is a great market as well, with strong and large operators both in the West and in the East. There are interesting initiatives that are popping up all over Asia and Oceania as well.

B2B sharing — where an operator’s fleet is rented out to its employees or other companies for their short-term use — flies mostly under the radar because it’ll most often be smaller operations with a fleet of cars belonging to a given organization and used by its employees. That being said, there are thousands of groups, cities and utilities that have equipped their vehicles with sharing capabilities in the last decade or so.

And in the P2P game, you’ve also got a few players that are deploying market by market and companies are mostly setting themselves up as competitors to traditional car rental.

In North America, are any business or government fleets engaging in any of these practices or considering doing so?

In North America, the number one thing in the “corporate” game would be vehicles made available for ride-hailing drivers, if we consider them to be independent contractors. They are hourly, daily, weekly of even slightly longer-term rentals for their professional use. This has been prevalent for ride-hailing drivers for a few years now and the trend is now hitting both van rentals for deliveries of online purchases and food delivery services.

Many car sharing initiatives are also being launched by cities, utilities, and other organizations with large fleets to streamline the access to vehicles and potentially reduce their fleet size. This entails companies inserting a device in an entire fleet of cars to give lock/unlock capabilities to drivers without the use of a key, thus enabling a pool of people to have access to a given car at different times in the day. Of course, this is gaining traction in companies trying to save money on their fleets.

Another promising model we are seeing is undoubtedly B2C car sharing operators becoming also B2B operators by giving corporations access to shared fleets that are already out on the streets for any consumer. Some of our customers in select cities that run large fleets of 1,000 vehicles, for example, are offering local companies that own small fleets the option to get rid of those fleets and use corporate accounts, as well as a set of tools to optimize the use of those accounts.

How does that compare with Europe?

Well, corporate car sharing technology is already more prevalent in Europe. There are more fleets with devices onboarded, more fleets that are shared, so more choices for companies looking for other options.

Here is one: if you are in a large city in Belgium, you can sign your company up with a car sharing operator called Poppy. They will enable all your employees that are signed up to use their cars for business uses. Plain and simple, companies can abandon their corporate fleets and just use their vehicles — they have multiple hundreds per city. You log onto an app, find the car that’s closest to you, switch to your corporate account and you can drive off and keep the car for a few minutes or a full week if you need it.

So, as a general rule, you get this option that is much cheaper than having a fleet of cars and it can scale up or down much easier. As another example, a company could also own 20 or 30 corporate cars for 1,000 employees, but if once per month it needs 10 more, it can just use those shared cars for the day, pay for them on the spot with their corporate credit card and then not have them the rest of the month. These options give you much more flexibility and can make your life much easier as a company manager.

A big barrier to corporate car sharing appears to be managing risk, both in terms of liability, vehicle downtime as a result of accidents, and vulnerability to theft. How are these issues being addressed?

When you take the corporate car sharing approach described above and leverage existing fleets by making them available for corporations, you’re not adding much risk by adding corporate users, and it represents an opportunity for B2C operators to increase their utilization. So, in fact, it’s a massive opportunity with very low incremental risk for these mobility operators.

What do you believe is the near-, mid-term and long-term future of car sharing in North America, particularly for traditional business and government fleets?

Let me answer this with another question. How many cars have remained parked for weeks or even months in corporate lots due to the COVID crisis? Companies have essentially been shoveling money out the window for months and there is no way that this wasted expense doesn’t bring them to reconsider ways to optimize their fleet!

In the short term, companies will look for solutions to reduce their fleet costs, as they have been doing. However, we believe it will become more prevalent in a COVID and post-COVID world in which the use of videoconferencing skyrockets and where it is highly likely that people will travel fewer miles. Corporate fleet utilization needs to be maximized and we expect that sharing solutions will enable these corporate fleets to reduce in size (by inserting more tech in the process) and even be partially or completely replaced by other options (which should also involve sharing).

Mid to long term, electrification will lower maintenance costs for shared fleets and further tech enhancements will continue shifting the paradigm towards sharing by reducing operational complexities even more.

If car sharing by businesses and government does have a future, what will make it happen?

This market is still in its infancy, so a market recalibration is quite normal. We believe that B2C schemes will flourish, but in targeted initiatives, many of which we are working on right now. Many things will drive these initiatives, including flexible tech that enables more ways to monetize cars for less upfront development costs. You can also bet that government incentives like lower permit fees and subsidies will be part of the mix, as share mobility operators increasingly work with local and state/provincial governments to enhance city living.

The movement towards sharing in the corporate world will continue occurring organically under the radar, especially after the COVID shock, as a way for companies to rationalize costs and reduce risk that fleets will stay idle for long periods.