Would you rent a BMW vehicle if you couldn’t buy it for some reason? For instance, what if you couldn’t afford a monthly payment for the BMW M6 sports coupe, which has a U.S. starting price of $102,350? Would you be willing to short- term lease it or rent it by the hour whenever you wanted to use a car? What if you could rent out a BMW compact 1 series for just €16 ($22.29) per hour or a flagship 7 series sedan for just €32 an hour? Would you choose a BMW model over some other make or model of car? BMW is assuming that consumers would do so. Since the BMW Mini Cooper is currently one of Zipcar’s most requested rental cars, BMW may be right.
BMW on Demand
On October 22, 2010, BMW Group announced it would be starting a year-long experiment, called BMW on Demand. It’s basically BMW’s first effort at breaking into the car-sharing business. BMW’s decided to enter the car-share/car rental business to help make up for the shrinking profit in the auto-making industry.
During the BMW on Demand experiment, consumers can rent or short-term lease any current BMW model from its product lines. All you have to do is pick it up and drop it off at the auto maker’s exhibition, event and car delivery center. The cars can be reserved online, by phone, or at the counter at BMW Welt, which is located next to the BMW headquarters.
Consumers have to pay for their own fuel, plus the rental fee. However, BMW says it will cover insurance, cleaning, and servicing costs. Unlike other car-sharing providers such as Zipcar, BMW will only charge the consumer for the actual time the car was used. Zipcar users have to pay for the full reservation period even if the vehicle is returned early.
Although the program is only available on a small basis now, BMW plans on expanding to other areas of Munich during the experiment’s second phase. If the experiment succeeds, then BMW will expand this mobile service to other areas of Europe. Eventually BMW on Demand may arrive in the United States.
Basic Concept of car-sharing/short-term leasing and its benefits
The basic concept is that consumers can just rent whatever car they want to drive for the period of time they actually need the car. There are numerous benefits to car-sharing. Some of these benefits are:
- Saves money for consumers due to less ownership costs (taxes, maintenance, annual liability insurance)
- Helps eco-system (fewer cars would have to be made and driven)
- Provides consumers with several choices of vehicles every time they drove, including otherwise unaffordable luxury cars
- Provides more access to private transportation so people who can’t afford a car can still get to places not easily accessible by public transportation
- Permits every consumer to fully test-drive each make and model of vehicle under normal driving conditions before purchasing a similar vehicle
BMW’s car-sharing competition
BMW is not the first auto-manufacturer to experiment with car-sharing. Numerous other manufacturers have considered offering car-sharing/hourly car rental services due to increasing urban populations and declining purchases by young drivers. Peugeot, a French auto maker, has been conducting a project called the Mu initiative. It’s being utilized in various European capitals this year. The Mu initiative permits drivers to use pre-paid accounts to lease various types of vehicles on a short-term basis. These vehicles can range from a van to a bicycle.
Daimler AG has been busy testing a Web-based ride-sharing type of program. Its initiative is called Car2go, and is similar to Zipcar’s car-sharing businesses in the United States and United Kingdom. For this project, drivers pinpoint and pick up available Daimler Smart-brand cars ad-hoc. Drivers are linked to the cars through software that permits the drivers to pick-up and drop-off cars whenever and wherever they prefer. So far, 15% of Ulm, Germany’s registered drivers are signed up to use the Car2go program. Daimler has extended the program to Austin, Texas and plans to eventually expand it to Hamburg and other locations.
Daimler has also launched a carpooling variation of Car2go, called Car2gether. Car2gether uses social media outlets to link riders with compatible drivers. The current system requires passengers to pay a small cash fee to assist with the vehicle maintenance and fuel. However, Daimler plans to install an automated payment system and take a small cut of the fees as the program progresses.
Car-sharing trends
According to the Frost & Sullivan research firm, car-sharing networks will continue to increase within the next five years. They expect there to be 4.5 million North American members and 5.5 million European members involved with these types of car-sharing programs by 2016. According to the firm’s estimations, revenue from car sharing services could reach up to $3.3 billion in North America and €2.6 billion (about $3.2 billion) in Europe.
However, Zipcar thinks the traditional hourly car rental agencies like U-haul, Enterprise, and Hertz will be able to undercut BMW and other car-sharing crop-up businesses in North America. According to Zipcar’s S-1 filing in June, rental car agencies have better-known brands and better financial, technical, and marketing resources than the newer car-sharing businesses have. Thus, Zipcar doesn’t expect the Frost & Sullivan estimates to be accurate until around 2020.
Either way, the estimates are helping to attract attention from other industries as well. In the future, we may see all types of sharing-networks started up. We may all have to learn how to share nicely with others if we want to drive or use a computer in the future.
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