The Auto Industry Embraces Its Own Disruption

By: Shelby Clark, Founder and Chief Community Officer, RelayRides. Follow him at @shelbyclark

This article was first published on the Harvard Business Review blog.

In a flashback to our days on the playground, a growing number of consumers are embracing the idea of sharing. People are sharing everything from apartments to designer dresses, and the surge in popularity has given rise to what has been called the “sharing economy.” This movement is reshaping the way people are consuming, and disrupting many established industries in the process. While some affected industries are fighting the changes, the automotive industry actually appears to be encouraging the disruption. By participating in their own disruption, forward-thinking players are positioning themselves to thrive in an evolving environment.

A category that has led the charge in the growing sharing movement is carsharing. Carsharing provides convenient, affordable access to vehicles located all throughout urban areas, and is meant to be an alternative to car ownership. Users find that carsharing can satisfy their mobility needs without the hassle and at a fraction of the cost of owning a car. In fact, the average carsharing member saves $500 per month compared to car ownership. Zipcar, the leading carsharing service, has built a billion dollar business on the back of this trend. The industry is expanding rapidly, exhibiting 44% annual growth, and a recent study by Frost and Sullivan projects that carsharing revenue in North America alone will exceed $3B annually by 2016, serving 4.4M members.

Consumer preferences are changing. Many consumers simply do not want to buy a car. In fact, 2009 was the first year when more Americans ditched a car (14M) than bought a car (10M). This trend is at least partly facilitated by the growth of carsharing, which makes it easier to live a car-free lifestyle. Studies have shown that for each shared vehicle, thirteen cars are taken off of the road as the consumer chooses not to buy a car or to sell a car after enrolling in carsharing.

As the growth of carsharing means fewer cars sold, one might assume that car manufacturers would be vehemently opposed to the growth of carsharing. Interestingly, however, the industry has largely embraced carsharing, with at least six OEMs making forays into the carsharing industry.Ford has recently announced a deal with Zipcar to make their cars more accessible to college students. Damler, BMW, and VW have launched their own carsharing services, and Toyota is partnering with a real-estate developer to offer electric vehicle carsharing in condominiums in Tokyo.

To date, the largest move by an OEM into the carsharing space is a partnership between General Motors and RelayRides, a peer-to-peer carsharing marketplace that allows individual car owners to rent out their idle vehicles. Any GM car owner who lists his car on the RelayRides marketplace can link his OnStar and RelayRides accounts. This allows a borrower to reserve and unlock a GM car with nothing more than a mobile phone. The partnership makes 15M existing GM cars “RelayRides ready” with no additional technology needed in the car.

Consumers tend to buy cars they are familiar with, so if GM can get consumers driving and loving GM cars, they will be more likely to buy a GM car if and when they do purchase a car. One could argue that carsharing is disrupting GM’s core business, and instead of fighting the disruption, GM is participating in the disruption, and helping to shape the conversation in a way that will ultimately help its business.

The automotive industry seems to have accepted that there has been a permanent shift in consumer behavior, and that carsharing is not only here to stay, but it is accelerating. OEMs realize that they can’t force a consumer to buy a car. What they can do, however, is to start understanding and building relationships with consumers who don’t currently want to buy a car.

The sharing economy has witnessed incredible growth with very little involvement from incumbent industries. How will major industry players impact the sharing movement? What happens when the disruptor and the incumbent hold hands?