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BMW Earns Profit By The Minute With Car Sharing: Is Ownership Dead?

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BMW using 1-Series and MINI Cooper in DriveNow initiative

BMW using 1-Series and MINI Cooper in DriveNow initiative

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In case you haven't heard: car sharing is big business.

Broadly speaking, there are two kinds of car-sharing companies. Zipcar -- America's pioneer in the sector -- represents one type, which is similar to a traditional rental car business, except it operates on a membership model. Renters pay annual dues, which give them access to the company's fleet of vehicles that can be rented by the hour on very short notice and with very little hassle.

The other kind of car-sharing company has been made possible by smartphones and allows individual car owners to loan their vehicles to car-less neighbors. RelayRides -- probably the best example in the U.S. -- lets those in need of a vehicle search for cars in their area, make a reservation, and pay for the rental. With this kind of car-sharing, the vehicle's owner makes a tidy share of the profits.

Both kinds of car-sharing companies are making big gains, and the auto industry is taking note. Avis bought Zipcar for $500 million earlier this year. General Motors has partnered with RelayRides, allowing borrowers to access loaner vehicles using OnStar

More recently, Bloomberg reported that DriveNow GmbH -- a joint venture between BMW and rental company Sixt AG -- has begun turning profits. And one of DriveNow's closest competitors, Daimler's Car2go, should be in the black by next year. 

What's it all mean?

First, car-sharing seems like a natural outgrowth of the global trend toward urbanization. In much of the developed world, most of the population live in urban areas. Theorists predict that 70% of Planet Earth's human inhabitants will do so by 2050. And you think it's tough to find a parking spot now?

So, storing, insuring, and fueling cars is expensive -- not to mention unnecessary, given the strong public transit systems found in many cities. Add to these facts a certain eco-sensitivity among Millennials (and to a lesser degree, their elders in Generation X), and it seems logical that car sharing, not car ownership, is making strides.

But second -- and perhaps most importantly -- car-sharing seems part of a larger movement away from ownership in general. This is perhaps most evident in the increasing digitization of our daily lives. We don't own DVDs anymore, we stream videos from subscription services like Netflix. We don't buy books or magazines in hard copy, we buy them in electronic format and read them on our tablets. We don't store our own documents on our hard drives, we keep them in the Cloud, in places like Google Drive. 

That's not to say that pride of ownership is entirely dead. Heck, people still wait in line for days to buy the newest iPhone. However, the things we're proud of owning have changed, and cars don't seem to have made the cut.

Once upon a time, driving was a rite of passage, a rite that bestowed freedom on young people -- freedom to get away from their homes and spend time with friends in the sprawling suburbs of the 1950s and 60s. Today, young people have Facebook and Face Time, and if they really need to connect in person, they probably take the subway. You could argue that in the developed world, cars are becoming a luxury item, and many folks would rather share a vehicle than shoulder the burden alone. 

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Comments (2)
  1. Car sharing is a great solution for many people who cannot afford to buy a car, don't have parking space, cannot handle all the hassles of insurance, registration, decal and so on. For the rest of us owning a car is a big pleasure, like owning a diamond or a pet, or even a new iPhone. But both owners and renters will benefit of car sharing: less cars on parking lot.
     
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  2. While not really necessary for me personally, I think the overall concept is great, and not just for people living in urban areas without a personal vehicle. It's also an opportunity to test drive vehicles that may not be possible to rent from the traditional rental companies. I'd love to rent a Model S, for example, before buying one, but a car share might be my only chance.

    Please note that I don't think the Model S will be part of this, at least not soon. I just meany any vehicle that may be niche or can't be test driven elsewhere. In many situations, car sharing programs make sense.
     
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