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A Deep Dive into Free-Floating Car Sharing

Could the rise of free-floating shared cars be a case of ‘slow and steady wins the race’? Today we look at the fundamentals behind this business model and discuss its potential as a late bloomer in the mobility space.

Believe it or not, the free-floating car sharing model was around even before electric scooters began hitting our streets and establishing themselves (seemingly overnight) as a fact of life. However, despite the head-start, free-floating shared cars (FFCS) have yet to become ubiquitous in our urban landscapes like their two-wheeled, 15-kilogram counterparts. That is not to say the sector has been dormant. In fact, a number of important developments both recently and over the last few years may suggest that this mobility trend could be about to come into its stride. Chief amongst these developments is that more and more FFCS services have realised pathways to profitability in certain markets. With that under their belt, expansion and scaling up may not be far around the corner. Indeed, vehicle OEMs who have previously only dipped their toes in this space are now showing signs of doubling down.  

In presenting you this deep dive we had the opportunity to interview Steffen Frølund, Chief Marketing Officer from GreenMobility, about the business fundamentals and strategic considerations of running a FFCS service. We also looked at data and analysis from a 2020 report by shared mobility expert Augustin Friedel who works at Volkswagen, Corporate & Sustainability Strategy. In addition, we drew upon RISE’s own knowledge and research in this space.

Current Landscape in Europe

There are currently about 100 FFCS spread out between roughly 50 different cities in the European market. Most of these cities have only one local FFCS operator with fleet sizes ranging from between 50 and 200 vehicles. In such cases, these FFCS operators tend to be relatively small startups operating in only a few cities within their home country.

At the other end of the scale, there are several major cities such as Madrid, Paris and Berlin where strong competition exists between three or more operators, with the combined number of vehicles totalling in the thousands. These are also the cities where the market leaders owned by automotive OEMS and car rental incumbents tend to operate. Share Now, a joint venture between Daimler and BMW, is currently the biggest player and operates 11,000 vehicles in 16 cities and 8 countries. SIXT Share is likely the next biggest player, with operations in 11 cities.

Other OEMs such as PSA, Renault and Volkswagen also have skin in the game. While their operations are still limited to just a few cities at this stage, they have all recently announced plans to double down on the free-floating future of mobility. PSA through its creation of Free2Move as a mobility services brand; Renault’s similar move with ‘Mobilize’; and Volkswagen’s plans to expand WeShare in Berlin to seven other cities.

In between these two ends of the scale, there are several FFCS startups that have established themselves across multiple cities within a home-region. There is GreenMobility in the Nordics, CityBee in the Baltics, ‘Yea!’ in France, Miles in Germany and ‘enjoy’ in Italy. Of these, the Danish publicly traded GreenMobility appears to be the first to expand into other markets further away from home, having launched in Ghent and Antwerp (Belgium) last year and with further plans to be in 35 cities by 2025.  

So despite not spreading as fast as the phenomenon of shared electric scooters, the footprint of FFCS services in Europe has been steadily gathering pace – although not without setbacks. Afterall, Share Now did completely pull out of North America in 2020, while shuttering its operations in London, Brussels and Florence. However, against this decision were positive signs for the FFCS business model on the whole, with Share Now stating that they saw clear potential for profitable growth in their remaining markets. Additionally, GreenMobility announced in September 2020 that they had achieved overall operational profitability in their Danish services.

The ICT infrastructure backbone that enables these services has also matured in recent years. Full stack sharing-platform providers such as Vulog and Wunder Mobility now offer turnkey solutions for startups. This significantly lowers the barriers of entry for FFCS as new entrants do not have to develop complex software in-house but can instead purchase it as a service off-the-shelf.  

Business Fundamentals

First and foremost, one of the key anchors for the FFCS business model appears to be urban density. Hence why Paris, Madrid and Berlin have spawned stiff competition between a multitude of operators – resulting even in price wars that has seen introductory offers from as low as €0.09/minute.

The next elephant in the room after population density is parking. Parking in terms of availability, special dispensation (for electric or shared services) and also whether there is a clear, city-wide framework in place – so users and operators don’t get racked with parking fines and a complex process of negotiating terms in the setup phase.

After those two make or break considerations, everything else is about optimization. In FFCS, the fixed costs consist of car financing, parking agreements, vehicle maintenance and fuel (including charging), and the labour cost of the ground team responsible for cleaning and repositioning vehicles.

Revenue, however, can be highly variable – and this comes down to how well the operator is able to acquire and keep customers during the growth phase, but most fundamentally, how effectively they can optimize the placement of vehicles to maximise utilisation. Other aspects such as the pricing structure as well as the form factor of the vehicles on offer (micro vehicles, small hatchbacks, SUVs or vans) will all play a role.

According to GreenMobility’s CMO, Steffen Frølund, getting these elements all right requires operators to be nimble and implement fast feedback loops between customers and every level of the organisation. Common areas where customers tend to get parking violations are quickly updated on Green Mobility's app map, so users cannot end their trips there. They take customer feedback into account when considering expansion of a city’s operational zone. But above all, trip data need to be carefully analysed to provide insights for optimising fleet placement – on this front, Frølund admits that GreenMobility could indeed invest more in the use of AI.

In addition to the above fundamentals, an area where the business models of different FFCS operators diverge is how electrified their fleet is. For operators like Share Now and Sixt Share, whose fleets overall are still predominantly fossil based, cities considering the introduction of zero-emissions zones can be a significant risk. While for GreenMobility and WeShare, who have purely EV fleets, the maturity (or lack thereof) of a city’s existing charging network can be an added showstopper to expansion.  

When it comes to customer acquisition, services with diversified offerings may have a big advantage. Sixt’s app packages together their rental, ride-hailing and FFCS service in one – significantly lowering the barrier for users of their other mobility services to try car-sharing. Similarly, Belgian operator Poppy Mobility has a significant user base on their platform thanks to their e-scooter and moped offer. Both Poppy Mobility and Stockholm based Aimo indicate that the booking frequency per user can increase by as much as 30% by having multiple vehicle types in the one app.

Policies

When it comes to policies that could support this growing niche of car-sharing, it’s not sexy, but parking is key. Ideally, parking rules that are designed to be FFCS-friendly – but failing that, the parking rules need to be at least city-wide and consistent. In Madrid’s case, a large reason for its attractiveness as a market for FFCS (besides density) can be attributed to its free-parking policy for electric cars.

According to GreenMobility, policies like zero-emissions zones and congestion charges, while welcome, do not provide nearly as much benefit to (electric) FFCS operators as policies related to parking. Frølund mentions that another area where policy does play a big role is on the broader point of just how expensive and inconvenient it is to own a vehicle in a particular city or country. This could depend on a policy mix of tax, registration costs, insurance, parking, and more.

Outlook

Love them or hate them, e-scooters have prepared the ground in hundreds of cities around the world for free-floating everything. They have shifted user expectations for convenience, as well as opened up the market for one-way vehicle hire – so users do not have to pay for the vehicle being left idle at their destination, instead they just pay for it while they are using it. This arguably makes station-based car-sharing models seem less attractive in comparison. FFCS can also leverage the ‘network effect’ to a much greater extent than the station-based model. The larger the free-floating network is, the more likely they are able to serve a similar function to a user as a station-based service – but with greater flexibility and utilization rates.

While it’s not a sure bet, the outlook for FFCS does look promising. The mature ICT backbone in the form of full-stack sharing platforms has reduced the barriers to entry for a number of ambitious startups like GreenMobility, now ready to accelerate expansion into dozens of cities. While some of the OEM backed ventures such as Share Now have seen some consolidation in the pursuit of profitability, many others have also doubled down with the announcement of subsidiaries created specifically for the aim of scaling up this business model alongside other mobility offerings, such as ride hailing and subscription leasing. Some vehicles such as the Renault MZ-1 are even being designed and produced with the specific purpose of the FFCS model in mind. Furthermore, maturing charging networks, the lowering cost of electric vehicles, and the risk of cities implementing zero-emissions zones (or electric mandates specifically targeting sharing operators) mean that the sector is rapidly trending towards fully electrified.

And in case after reading all this you are (rightfully) wondering – do free-floating shared cars help with congestion, or do they actually make it worse? Here is some peer-reviewed food for thought

Written by Bobby Chen,
RISE Mobility & Systems (Elektromobilitet)

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