Does it make sense for manufacturers to rent cars by the minute instead of selling them?

In 2008 Daimler launched the car2go service in the German city of Ulm, and now operates in 26 cities. The vehicles it operates are its own, either smart fortwo petrol or electric. PSA had a similar idea and set up Emov in Madrid. Now Renault is also planning to do the same with Ferrovial. Compared to a traditional rental service, you don't have to make a reservation in advance -although you can do it minutes in advance- and you forget about agencies: you pick them up and "return" them in the street (not necessarily in the same place), without paperwork or cash.


We could think in good logic that these cars may dissuade many people from owning their own car. In the city of Madrid, car2go has 166,000 registered customers, Emov already has 110,000, but how many people use these services on a regular basis is another matter. For less than 10,000 kilometers a year, you have to think deeply about the need to have a private car and to be paying a lot of money for the financing, insurance, parking space, depreciation, maintenance, etc. In the United States, 30% of car2go users -in 2012- got rid of their car.

car2go cars cost 21 cents per minute in Madrid, Emov cars cost 24 cents; you only pay for the use. Before June it was 19 cents for both services.

Users of the service already have insurance, mileage and "fuel" included. You pay a registration fee and other surcharges for misdemeanours such as losing the keys, a bump (there is an excess), getting a fine and so on. In other words, you can have a car without any other worries. And those who need the car for a whole day can do so, although a traditional rental car may be cheaper, but here you also pay for availability.


Let's go back to the bottom line. These services mean that fewer cars are sold, true, but normally those who do not need a car in property usually need mobility services. If the manufacturer doesn't provide those services, they let that money go. Daimler probably sells fewer smart cars because it has car2go, but at least it makes money it would otherwise lose. What's more, Daimler is sure to make money from the people who no longer need to own a Ford, Dacia or Opel. On the other hand, the customer can better appreciate the advantages of driving an electric car and that may encourage them to have their own in some cases.

Today, some electric cars are very difficult to make profitable for an ordinary person, one of those who have their means of transport parked practically all day. On the other hand, rentals by the minute have the cars in motion for longer, so you get more profitability for the lessor. However, to speak of profitability, the cars must be rented several times a day. In Madrid the smart fortwo EVs are rented an average of 15 times a day, the highest average in the car2go network. Emov's Citro├źn C-Zero cars are driven 13-14 times a day.

There are only three cities in the world with electric car2go: Amsterdam, Madrid and Stuttgart. According to July data provided by the company, 1,400 electric smart fortwo electrics had accumulated 57.3 million kilometers in six years, almost 41,000 kilometers per car. If we convert that into pollutant and carbon dioxide emissions by weight, that's a not inconsiderable saving for these built-up areas.


Let's talk about externalities. On the positive side, these cars reduce congestion because the same number of vehicles moves more people. Moreover, as they are electric - in the case of Madrid - they reduce pollution on the spot. If the number of private vehicles is reduced, there is more room to park, but by the same rule of three, the 500 cars of car2go and the 550 cars of Emov also take up space when they are not in use. These cars park in public parking spaces, although they are used for a private activity. Precisely the fun of these services is that you can park anywhere without paying, even in green/resident zones.

Malaga could be the next Spanish city to receive Emov cars.

Would it make sense for the city councils themselves to set up companies of this type? That will depend on who we ask, a public company is supposed to be more concerned with utility than profitability, and it is difficult to justify this use of public resources when there is such a thing as "public transport". Progressively, the useful applications of big data will allow us to adapt much more the offer and frequencies of public transport to match the real needs of the people. We should not underestimate all the information that mobile phones are generating every day, but that is another matter.

These per-minute rental models are not universal, they make sense within large urban areas. In the case of Madrid, the cars can be taken anywhere their autonomy allows, but they must be parked within the perimeter of the M-30; in the case of Emov, it allows some peripheral neighborhoods. Later on it will be possible to do this on the M-40, but you need to have a much larger fleet of cars to provide a decent service. There's not much point in the service if you can't get a car within a short walking distance, is there?


Granted, electric cars don't work for everyone, but for these kinds of very short trips and in densely urbanized areas they make all the sense in the world. The electric range can be sufficient with the 80-100 kilometers that the fortwo and C-Zero easily do. And what if they need to be charged? That's taken care of by the maintenance staff. In short, it's all about simplifying things as much as possible. To simplify things, being electric and without gearbox (they only have forward and reverse gears), you practically don't even need to know how to drive.

After Madrid and -possibly- Malaga, what will be the next Spanish city to welcome these silent invaders?



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