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Fleet sharing: The next evolution of the leasing market
Car sharing is a global mobility trend growing so fast it can be tough to keep abreast of developments. Earlier this year, we posted a blog arguing that OEMs would dominate the global car sharing market, supported by a bullish 5 year growth projection we published within our Connected Mobility Global Forecast. In the last month alone, Daimler’s Car2Go announced that it had reached 2 million members worldwide. GM’s Maven began operations in its ninth US city by launching in San Francisco and BMW stated that their rapidly growing DriveNow platform had become profitable for the first time.
In many ways, the rise of car sharing has been a purely consumer phenomenon; a consequence of complimentary macro trends such as urbanisation, the wider growth in the sharing economy, eco-awareness and the prevalence of smartphones in modern life. The impact of car sharing for fleets has taken longer to materialise, but it is now beginning to do so. Unsurprisingly perhaps, the leasing market represents the front line of this new fleet sharing advance as business customers seek to extract more value and higher utilisation from their vehicle assets and the leasers attempt to differentiate themselves in a highly competitive and commoditised marketplace.
Bringing technological capability and experience from the consumer space, OEMs have been among the first to market. Launched in 2012, Alphabet, BMW’s leasing arm, has experienced a high rate of growth from its Alpha City sharing brand, particularly among public sector clients. LeasePlan has also been highly active, striking deals with Infiniti, among others, to deliver its SwopCar sharing service. In this case, LeasePlan is responsible for fitting and managing the aftermarket telematics device, unlike Alphabet, who are able to utilise the embedded connectivity provided by the BMW ConnectedDrive platform.
While there are clear benefits to be had from using one’s own platform, this could present problems for Alphabet, who, despite being owned by BMW, remains a multi-brand leasing provider and it will be imperative to ensure a continuity of service across the vehicle portfolio.
Two sides of the same coin: BMW’s DriveNow & Alphabet’s Alpha City
Driven by changing customer demands, leasers are responding to a shift from vehicle oriented to driver oriented services – a transfer greatly enhanced by telematics and in-vehicle connectivity able to deliver both mobility and infotainment services. Nonetheless, other large leasing companies, such as Arval, VW Financial Services and ALD International, have been a little slower to react. Directly addressing this gap in the market, Renault recently confirmed the launch of Renault Mobility, a new car-sharing scheme designed specifically for fleet vehicles. The service will be delivered via an aftermarket telematics device, which can be installed in any branded vehicle. The scheme will be operated by Renault’s leasing and finance arm, RCI Mobility, and will enable fleet managers to privately share their vehicles as well as expanding inter-company use. Renault Mobility is also expected to benefit from added value services incorporated into Renault’s own telematics system, R-Link.
The move represents an interesting development in the leasing market; independent (non-OEM owned) providers will be able to access a purpose-made fleet sharing solution adaptable to their entire vehicle portfolio. Unlike Alphabet and BMW, Renault is hedging its bets by combining the agnostic functionality of an aftermarket technology solution with the added value of its own R-Link enabled services. In a market challenged by tight margins and fierce competition, fleet sharing represents a strong value add to the customer, which benefits from the growing recognition of car sharing in the consumer market and the ability to reduce the total cost of leasing the vehicle by increasing utilisation. While some leasers, such as Arval, have committed to equip 100% of their fleet with their own aftermarket telematics solution by 2020, others are less advanced. Installing the telematics device which makes fleet sharing possible could help increase the penetration of connectivity among leased fleets, bringing added value and additional services to the customer and greater visibility of their assets to the leasers. Surely a win-win.
According to our Connected Mobility Global Forecast, there are over 15 million leased passenger cars in the world today (see chart), which will rise to almost 25 million by 2020. We further estimate that the share of connectivity among these vehicles will reach 39% by 2020 – equal to 9.5 million vehicles. If each of these vehicles becomes a shared vehicle, the fleet sharing market could make the car sharing market look tiny in comparison.