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GM Signs Car Share Deal, Joins Other Automakers Warming to Trend
Wednesday, October 05, 2011 - 07:30 PM
America's largest automaker is embracing carsharing. GM has signed a deal with peer-to-peer car sharing company RelayRides to make it easier for drivers to rent out their cars by the hour to neighbors, the companies announced Wednesday.
"We could stand on the sidelines and watch or we could choose to participate and try to make it into a favorable business model, which in this particular case we have," GM's Bob Tiderington tells TN.
GM will adapt its OnStar anti-theft technology to facilitate car rentals, making it cheaper and simpler to sign up with RelayRides as a car-lender. In exchange, GM gets a percentage of every rental of an OnStar equipped car. OnStar enables remote locking and unlocking of a car. So, an owner who wants to rent out their car no longer has to install a separate device to let neighbors open the door and get the key, they will be able to use a mobile phone app instead.
When the plan launches in early 2012, all GM vehicles built after 2010 with OnStar service and current subscription will be "carsharing ready," says Tiderington, who is the head of new business development initiatives at GM. That's 1.7 million cars that could be turned into peer-to-peer rental cars right off the bat, in theory. "Our intent over the next four to five months is to also include [model years] going back to 2005," which boosts the figure to 6 million, Tiderington points out. Right now, RelayRides only operates in San Francisco and Boston, so nothing close to that will actually come on the rental market. According to Innovative Mobility Research, car sharing in North America has grown from 400,000 users in 2009 to 640,000 in July 2011. Consultants Frost & Sullivan predict car sharing users will reach 4.4 million by 2016. That's for company-owned fleets, RelayRides is one of the first and largest efforts to date of for private car owners to rent out their vehicles when they aren't in use.
There hasn't been a study yet on how demand and supply for peer-to-peer car sharing has functioned so far.
"We're still a small company, we're 18 months old," said Andrew Haddad, CEO of RelayRides. "I think [the OnStar partnership] will significantly spread car sharing to people who weren't considering it before, because it's easy. If its hard it won't spread." RelayRides pays about $500 in all to equip each participating car with the add-on device that lets a renter open the vehicle with a membership card. That's cumbersome for the owners, Haddad says. But OnStar cars will just need to turn the service on.
The other reason he's optimistic about partnering with a major carmaker is outreach to all those millions of GM owners. “We do plan to go out and reach out to these folks, both the current subscribers and people that are not active,'” GM's Tiderington says.
This partnership is notable, says Susan Shaheen, Director of the Transportation Sustainability Research Center at University of California at Berkeley. "Mobility services represent a new approach that can complement the core business model of automakers,vehicle sales, as well as the introduction of new technologies to consumers--such as alternative fuel vehicles and safety, real-time traffic, and parking assist devices."
2011 has been a year substantial growth for car sharing partnerships. Ford teamed up with Zipcar--which issued an IPO in April--for a pilot program on university campuses. BMW paired with Sixt on a one-way car rental program. Daimler is planning to expand it's car share company Car2Go, which only uses Daimler's Smart cars. The Austin-based one-way car sharing company is expected to set up shop in San Diego next.
The spread of RelayRides and other P2P companies, such as Getaround and Wheelz, is still unclear," Shaheen says. "I have not seen data yet to validate "matches" of demand and supply and overall consumer response." She plans to study the spread.
GM is optimistic. RelayRides says it plans to expand, and GM sees that as a marketing opportunity. "I think of it as a low hassle test drive," Tiderington tells TN. The more people he can get behind the wheel of a GM car, the more chance they'll buy it, he says. “So if you have one vehicle and 50 people rent it, some of those people are going to end up buying a product."
“You do it in certain markets, like say San Francisco, Los Angeles, Austin, Texas, Washington, D.C., markets like that where we don’t tend to do incredibly well, and we look at it as, ‘what do we really have to loose?’ We’ve already lost in the sense we have low market share there, so we look at it as a really good idea from a marketing perspective to get our product out there.”
That's a shift from a few years ago when automakers were lukewarm to the idea of car sharing and considered it a threat to sales. If several people could all share one car, they would buy fewer new vehicles overall went the worry. But Tiderington agrees with car sharing advocates that an idle car is a wasted resource. He wants GM cars on the road, and out in front of other potential buyers as much as possible. Plus, he points out that if renters put on significant mileage to a car, it will "turn over" faster, and the owner will buy a new one sooner.
He also predicts that new buyers will factor in potential rental income. “Say you want to buy a Chevy Volt, to some people, it might be a little bit of a stretch for them. The upside to it is they buy it, they get it into this program, they rent it out, they make maybe $200, $300 a month it helps, in a sense, offset their cost.”
Dealers will be making exactly that case for new GM vehicles in San Francisco and Boston.