CAR2GO: INDIVIDUAL URBAN MOBILITY AND THE SHARING
ECONOMY
Dmitry Alenuskin and Andreas Schotter wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation..
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Copyright © 2014, Richard Ivey School of Business Foundation
Version: 2014-11-17
On December 17, 2012, Nicholas Cole, chief operating officer (CEO) of car2go North America, and
Katie Stafford, communications manager for car2go North America, reviewed the latest performance data
(see Exhibit 1) of the company’s car sharing business in Vancouver. It had been more than 18 months
since car2go had launched in Canada. Much had changed since car2go decided to venture into Canada.
There was a noticeable presence of car2go cars spread across the greater Vancouver area now, with 325
‘smarts,’ the German built two-seater micro car (see Exhibit 2). The results had exceeded expectations
and were among the best of all of car2go’s 18 markets in Europe and North America. The number of new
members in Vancouver had reached 15,000. Encouraged by the results, Cole approved the expansion to
other Canadian cities including Calgary with its compact downtown but far reaching urban sprawl, and
the Toronto metropolitan area, characterized by more than 14 urban sub-centres that merged along their
boundaries and included more than 6.2 million inhabitants. Other Canadian cities also offered attractive
opportunities for launching car2go service; but the question would now remain — which Canadian city
would be the next best fit for car2go? Cole wondered how he and his team should strategically plan for
future growth in the Canadian market. Would the company have to modify its operating model to address
the different location characteristics? Would the marketing and communications tactics used in
Vancouver, Calgary and Toronto be easily replicated in other Canadian markets or would the strategies
need to be adapted? Would the existing locations continue to grow and if so, what would be the true
market potential?
CAR SHARING
Car sharing, also known as car clubs or car co-ops, was introduced as an alternative to full car ownership.
After a driving record check, one had first to become a member. Memberships were approved and
canceled based on official driving records and good standings in payment of membership fees. For
instance, car2go annually reviewed the driving records of its members and could suspend services for
members with more than three traffic violations in 24 months.
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Members had 24/7 access to the system. Access to cars was usually organized through communities or in
collaboration with transit operators, employers or dedicated car sharing facilities. 1 The car sharing model
allowed members to enjoy the benefits of a personal vehicle without paying the costs associated with
purchasing, maintaining and operating it. Operators charged pay-by-use rates based on the driving time or
mileage. Usually, car sharing vehicles had to be returned to designated parking stalls but car2go
employed a slightly different system — car2go members could pick any available vehicle using their
membership card as an access key, drive it without time constraints and park it anywhere within the
service zone (see ‘Using car2go’ section for more details).
Unlike the traditional car rental business, car sharing did not restrict users to the physical locations of
rental car companies as vehicle pick-up and drop off spots. Neither were members restricted by office
hours. Exhibit 3 provides an overview of the main differences between car2go and traditional car sharing
and car rental services.
Individuals drawn to car sharing tended to be relatively affluent, young (between 25 and 35 years of age)
and educated urban residents of densely populated areas with many alternative transportation options. The
well-developed infrastructure of such areas did not require this demographic to own cars in the first place
in order to go about their daily lives. In fact, low vehicle ownership rates were one of the best predictors
of the economic viability of car sharing programs. Key location choice criteria were based on
demographics, assessments of the level and characteristics of environmental and social consciousness,
and local societal consumer preference changes evidenced by declining social prestige attached to car
possession.
Car sharing began in Europe in 1948 when the first car cooperative was organized in Zurich, Switzerland.
In 2010, Germany, the United Kingdom and Switzerland held 75 per cent of all 500,000 European car
sharing members. In total, Europe had over 200 car sharing organizations with approximately 12,000
vehicles available to members. The largest European car sharing organizations, such as StadMobil and
StadtAuto in Germany, Autolib in France, and Mobility in Switzerland, operated as for-profit companies,
often in partnership with national railways public transit providers.
Members of traditional car sharing organizations acted as operators, who were in charge of the individual
reservations based on Internet or social media friendly mobile applications. Members also had to take care
of fueling, cleaning, pick up and returning of vehicles to pre-defined parking stalls or designated zones
within the service area. In 2012, Zipcar operated 160 parking locations in Vancouver compared to only
eight locations that Enterprise Car Rental company operated. However, Enterprise offered its customers a
free pick-up and drop off service to their rental offices. Traditional car sharing models offered various
selections of cars and membership terms. The greatest differences were parking locations, model variety,
advanced notice for bookings and per usage charges. Membership terms also varied — some companies
asked for a refundable deposit or a registration fee, and some companies had no charges for new members
and even offered free driving time.
Although Daimler was the first automotive manufacturer worldwide to offer a car sharing service with
car2go, over the past few years, several large car manufacturers have also entered the car sharing
business. In 2010, Peugeot launched its “Mu by Peugeot” service in 12 French cities. In 2011, BMW,
together with the Sixt Car Rental company, launched a “DriveNow” program in the German cities of
Munich, Berlin and Düsseldorf employing a total of 950 Mini Coopers, BMW 1 Series compact cars and
X1 Series small utility vehicles at a flat rate of 38 cents a minute. In 2012, BMW launched the same
1
“Some Carshare Basics,” The Commons: Open Society Sustainability Initiative,
www.ecoplan.org/carshare/general/basics.htm, accessed July 8, 2012.
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service with 70 electric Active-E vehicles in San Francisco. Volkswagen teamed up with Streetcar, the
biggest U.K.-based car sharing company, and supplied the Polo and Golf compact cars, Touran small
mini-vans and the larger Transporter van models in 10 cities. In 2009, as a part of Europcar Car Rental
company’s Zero Emission program, French car manufacturer Renault signed a partnership agreement
with the goal to provide a fleet of electric cars to 2,500 European locations for short-term rentals by 2011,
but the project was still in the works in 2012 because of the logistic complexities of the car sharing
business.
Car manufacturers did not consider car sharing as a threat to their core business of selling cars. Ian
Robertson, an executive board member of Bayrische Motoren Werke Corporation (BMW) responsible for
sales and marketing, commented:
As a mobility provider, the BMW Group is not simply an automobile manufacturer. There is a
growing demand for flexible mobility products in urban areas. Our DriveNow premium car
sharing services are aimed precisely at this gap in the market. We are intending to launch a
profitable new line of business while at the same time introducing potential new customers to our
brands. 2
CAR SHARING IN CANADA
Modern car sharing in Canada took off in Quebec in 1994 and then spread to the United States. Due to the
lack of existing models, car sharing in Canada during the early years did not receive much governmental
support. Moreover, pioneers of Canadian car sharing faced criticism from local transit operators who
believed that car sharing might discourage rather than attract riders. As a result, member-to-vehicle ratios,
an important metric in the car sharing business, had been growing at a slow pace in Canada as compared
to the United States, which is characterized by one of the highest member-vehicle ratios in the world
(approximately 49:1). The Canadian member-to-vehicle ratio stood at only 26:1 on average. 3
car2go in Vancouver was doing much better. For example, it reached ratios of more than 46:1, although
this number could be misleading, experts said. Karen New, information systems director of Modo, a car
sharing co-operative from Vancouver, said:
The difficulty with this measure is defining the word ‘member’. If you define it as people who
have access to your cars, you can drive this ratio as high as you like by reducing barriers to entry,
including very low membership fees. Or you could simply give away memberships and then drive
up the ratio with people who have no intentions of using your service regularly. But if you define
a ‘member’ as someone using your vehicles actively, the ratio would be different. It is these
active members that you are after. 4
In 2012, Canada’s 17 car sharing operators had more than 60,000 members in total. Eleven of these
organizations were member-owned cooperatives. During the prior three years, car sharing memberships
had risen by 117 per cent and this growth was expected to continue over the next five to 10 years.
2
BMW Group and Sixt AG establish DriveNow Joint Venture for premium car sharing, press release,
https://www.press.bmwgroup.com/pressclub/p/pcgl/pressDetail.html?outputChannelId=6&id=T0100973EN&left_menu_item=
node__2201, accessed July 8, 2012.
3
S.A. Shaheen, A.P. Cohen and M.S. Chung, “North American Carsharing: A Ten-Year Retrospective,” Institute of
Transportation Studies, www.escholarship.org/uc/item/8jg510td#page-1, accessed July 8, 2012.
4
Author interview with Karen New.
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Many Canadian car sharing companies offered roaming memberships, which allowed members of one
company to use services from that same company in different cities without incurring additional
application or membership fees. Members could use their home key fob to get access to vehicles in other
cities, albeit at the specific rates of the respective roaming partners. In 2012, six Canadian, nine
American, one Australian and one Brazilian car sharing company had joint roaming agreements. car2go
also provided roaming services in Canada, but only within its own local system and, at the time, offered
no official roaming membership across borders from Canada to the United States or Europe. Zipcar had
no geographic restrictions and offered roaming access for its cars at the same rates in the United States,
Canada and the United Kingdom.
AutoShare pioneered car sharing in the Greater Toronto Area (GTA) in 1998. The company had a strong
environmental stand and by operating the largest and the greenest fleet of hybrid and electric cars in
Ontario, AutoShare strived to provide a shared vehicle within a five minute walk of anywhere in the city,
at every Toronto Transit Commission (TTC) station. AutoShare claimed that each of its vehicles
eliminated as many as ten privately owned cars on Toronto’s roads. According to the company survey, its
customers used personal cars only for four per cent of travel needs, and most often members chose
alternative transportation or public transit. AutoShare established partnerships with major real estate
developers and provided commuting vehicles to residents of 31 apartment complexes and five
commercial centers in Toronto. The company was an officially recognized partner of the transportation
system of the City of Toronto. 5
The top five Canadian car sharing companies in 2012 were car2go, Communeauto from Quebec,
AutoShare Inc. from Toronto, Modo cooperative from Vancouver, and Zipcar, a U.S. based company
with operations in Vancouver and Toronto (see Exhibits 4, 5 and 6).
In June 2010, the rental car company Hertz launched, as an effort to enter the car sharing market with
only five cars, a trial hourly rental business in Calgary and Edmonton in collaboration with the University
of Alberta and the University of Calgary. Later, Hertz announced plans to equip its entire North American
357,000 vehicle fleet with the technology for short-term rentals by the summer of 2013. Enterprise, the
largest U.S. rental car company with 140 locations across Canada, announced plans to enter the now fast
growing car sharing market in 2012.
According to autoshare.com, the top 10 car sharing uses in Canada in 2012 were: 1. Business meeting; 2.
Grocery shopping; 3. Private meeting; 4. Large items shopping (kitchen appliances, furniture); 5. Personal
trips; 6. School drop off/pickup; 7. Driving to the gym; 8. Hockey practice; 9. Rehearsal; and 10. Family
visit.
CAR SHARING BUSINESS MODEL
Car sharing was a hugely data-driven business. Making a booking, driving the car and changing the
booking — all these activities generated large amounts of data that needed to be managed. Because it was
a self-service business, many touch points with members were automated. Car sharing operators also
wanted to ensure that members would have a streamlined and intuitive user experience with as little
hassle as possible. The key to success in this business of low margins (most companies operated in the
negative 10 per cent to positive 10 per cent gross margin range) depended on the variety of different
vehicle options, the availability of designated parking spots and an efficient billing system. An efficient
billing system meant that usage prices needed to be as low as possible to encourage frequent usage but at
5
“The Smart Alternative to Owning a Car,” www.autoshare.com/about.html, accessed July 8, 2012.
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the same time prices needed to be high enough to make most of the individual drives profitable.
Calculating the sweet spot was very complex and depended heavily on the urban characteristics of the
individual locations. For example, if there was a homogeneous neighborhood where the majority of
residents had similar demographics, lifestyles and schedules, they would all need cars at the same time
and not spread out evenly over a 24 hour day. Meanwhile, in heterogeneous neighborhoods with different
demographics, members would likely have different schedules with different needs for cars, which would
help ensure a more even utilization of the service and more billable minutes per day. This would then
reduce per drive charges and in turn attract more members.
Per city economics heavily drove the number of employed vehicles and their placement. Operations in
densely populated urban areas involved high parking rates and similar use patterns among the target
group. Therefore, car sharing operators were most successful in smaller cities, where the average
commute time was shorter and vast geography offered various parking opportunities. Strategic placement
of available vehicles was another important consideration. An executive of Modo commented:
Other companies denote the neighborhood, place their cars and then try to create demand for
those cars by driving up membership. We place our cars in response to pre-existing demand. Our
members join us to use the fleet as it exists, and then, based on where those members live, we can
add cars in their neighborhoods to better serve an area. This means that instead of defining a
particular neighborhood where we want to be in, we let members define this for us. 6
Industry per vehicle utilization rates varied widely, ranging between 20 per cent and 60 per cent. Costs
were driven by the financing associated with the purchase of the vehicle, parking charges, fuel expenses,
repairs and maintenance, administration and general marketing expenses, and insurance premiums.
Per member economics were driven by member acquisition costs, average revenue per user (ARPU),
mileage, hours used and collected subscription fees. Many companies had additional surcharges that
ranged from paid telephone services for car bookings (Communeauto), fines for late car returns (Zipcar),
additional mileage charges (car2go) or upfront deposits, which were used to support vehicle financing
(charged at most co-ops). For more detailed information on car sharing costs and revenues see Exhibit 7.
CAR2GO BACKGROUND
The car2go concept was developed, financed and brought to market by Germany’s Daimler AG, the
parent company of Mercedes-Benz. The idea behind the concept was first introduced in 2007 by
Daimler’s Business Innovation Department in order to provide on-demand urban mobility solutions based
on a citywide free-floating, not rental station-based fleet of vehicles, which members could access at payper-minute rates. In 2012, car2go was integrated into Daimler Financial Services, the largest provider of
financial services for commercial vehicles worldwide.
Before the first customer roll-out, the concept was tested among employees of the Daimler Research
Center in the southern German city of Ulm. The pilot stage launched in October 2008 with 50 cars that
were available to 500 employees of Daimler and 200 family members. After six months of gathering data
on user acceptance and behaviour, and testing the technical systems, the service was launched to all
120,000 residents of Ulm in March 2009. During the same time period, a U.S. pilot project was launched
6
Author interview with Phil Baudin, Executive Director, Modo.
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car2go was well perceived and within three years it had branched out to 18 cities worldwide (see Exhibit
8). In 2012, Daimler announced that it now had more than 300,000 members who had taken advantage of
automatic rentals more than three million times. Daimler had plans to expand the program to 50 more
European and North American cities through 2017. In every new city, car2go usually employed 250 —
300 cars.
Vehicle of Choice
car2go initially started with a clear one-vehicle type/one-model strategy, utilizing the smart fortwo, a twoseater micro car — Daimler’s smallest vehicle. The smart, an acronym for Swatch Mercedes ART, was
the result of a joint venture formed in 1994 between Daimler and the Swiss watchmaker Swatch. Daimler
AG began building smarts in Northern France in 1997. The annual capacity of Smartville, the name given
to the manufacturing plant for the smart fortwo, was 200,000 cars but it had never reached full production
capacity. In 2006, Smart GmbH was restructured and its operations were absorbed within Daimler and
partner Swatch was paid out. Altogether, Daimler accumulated U.S.$5 billion 8 in losses on this model
between 2003 and 2007.
While initially selling 24,622 units during its U.S. launch in 2008, sales had been declining steadily to
only 5,208 for 2011. As in the United States, the Canadian market also did not embrace the Cdn$14,400
sub-compact car. For example, from February to March 2012, Canadians purchased fewer than 100
smarts. 9 Globally, sales dropped from 145,000 units in 2005 to 102,000 units in 2011. Daimler identified
the main problem as a distribution issue; hence, in 2012, the company took control of the distribution.
From that point on, sales once again grew steadily.
Convinced of the potential of the smart car, Daimler explored alternative business models including its
usability for fleet services in urban areas. The smart car was the perfect size for car2go, and the car2go
edition was the first factory pre-configured car sharing vehicle in the world. The cars were fitted with
intelligent stop-start functions, newly developed telematics and a computerized telecommunications unit
that allowed a fully automated rental processes. A solar roof supplied the electrical system with 100 watts
of power, which reduced fuel consumption by around 10 per cent. All car2go vehicles were equipped with
a touch screen radio and a navigation screen. In addition, the smart fortwo was the perfect size for most
trips that were taken in urban areas.
CAR2GO MARKETING AND PROMOTION
car2go used different marketing communication strategies for each city. Depending on the media
preferences of the target audience, the location of the popular destination and other specific city attributes,
car2go adjusted its press campaigns and launch events. Promotion teams would appear in central venues
of the city, grocery stores and on popular street corners to demonstrate the vehicle, to explain the
7
A. Osterwalder and Y. Pigneur, Business Model Generation: A Handbook for Visionaries, Game Changers, and
Challengers, John Wiley & Sons, 2010.
8
All currencies are in US$ unless otherwise stated.
9
Smart Fortwo Sales Figures, “Good Car, Bad Car,” www.goodcarbadcar.net/2011/01/smart-fortwo-sales-figures.html,
accessed July 8, 2012.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
in Austin, Texas, a city of 750,000 (at the time), where car2go’s North American headquarters were
established in 2009. Full service to the public in Austin was launched in May 2010. 7
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For example, for its Washington D.C. launch, in March 2012, car2go chose a catchy advertising campaign
“A better way to car share is coming to D.C.” placed in Washington newspapers and on “DCist,” a
popular local Internet blog. The advertisement included the promo code capital that waived the $35
application fee and offered 30 free minutes of driving time. car2go organized two launch “Ride and
Drive” parties at one of Washington’s hippest restaurants. It was announced with the tagline “Join us for
free food, promos and swag as we celebrate the launch of a better way to car share.”
Successful co-branding was another critical element for car2go promotion. For example, in Vancouver,
car2go partnered with IKEA for a member appreciation event. The advertisement featured a picture of a
smart packed with furniture from two different IKEA rooms and promised to demonstrate how this fitting
worked during the event and to reward new members with shopping sprees and gift cards.
Unlike other car sharing companies, car2go did not invest in extensive continuous marketing campaigns.
The print ads and local promotions generated enough interest to match rival Zipcar’s popularity. Zipcar
was widely regarded as an industry benchmark, with its innovative community-oriented social media
campaigns, by giving each individual car a unique name that would create a personality.
car2go was also different in many other ways compared to the competition. Katie Stafford explained:
We see ourselves as complementary rather than direct competitors to traditional car sharing
companies. Our model is very unique in that we focus on bringing the simplest, most convenient
and most flexible personal transportation system to entire communities — our model uses
exclusively smart fortwo cars — each ‘up-fitted’ with the most advanced car sharing technology.
Members can use the cars on demand without first making a reservation, and they can use the car
for a few minutes or a few hours. The vast majority of trips taken in a car2go are one way
(meaning members start their trips in one location and end their trips somewhere else), and they
last approximately 30 minutes. That said, we are one piece of the larger urban mobility landscape
— which typically includes a combination of car2go, public transit, traditional car sharing, peerto-peer car sharing, bike-sharing and walkable areas. This is the ideal setting for car2go.
car2go focused on making car2go as simple as using one’s own car, with the added benefit of universal
parking space availability and a walk-up and drive rental model instead of the need for pre-booking like
the competition would require. Stafford added:
City authorities appreciate that we only use a very small footprint for our cars. The smart fortwo
takes up less space than most other cars, and in some cases, two car2gos can fit into parking
spaces that typically host one full size car. Overall, we provide simple, cost-efficient individual
transportation for one to two people in and around metropolitan areas. If a customer needs to
transport larger goods, or if a person wants to take his or her family out for a long weekend trip or
to tour around town, then they may need to rent a car or use a peer-to-peer car sharing service that
offers larger vehicles. We embrace this. We know that as cities continue to develop and grow,
there must be a healthy mix of transportation options, and we know that we are one very
important piece of that mix. We are proud to be part of a generational shift, where technology and
economic factors give people instant access to many different methods of sharing. It is a really
exciting time.
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principle of the car sharing service and to encourage people to join on the spot based on free ride minutes
and waived joining fees.
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For example, when I have a special event to go to, I may think about purchasing a new dress. But
now, instantaneously, I can browse through thousands of designer dresses at
www.renttherunway.com, choose the one that suits my occasion the best, and they’ll deliver it to
me within a few days. Then, it’s mine to wear for that evening, at a very small fraction of the
original price, and I just return it within a few days, and suddenly it becomes available for the
next person to wear. Or, if my family is visiting Austin, Texas and I don’t have enough space for
them to stay with me in my small city flat, but I still want my family to feel like they’re living
like a local, I can rent someone’s home for a few days or a week through HomeAway or Air BnB.
This is new consumer behaviour, not just a phenomenon. And technology makes sharing —
anything — easier today than ever before.
“CUSTOMER — OPERATOR” CONCEPT
In 2012, the “customer — operator” concept was widely used by service and retail companies as a way to
improve operational excellence and save costs since customers would not require salaries, benefits or
office allocations. For example, by installing self-service terminals, grocery stores put the labour of
scanning, packaging, searching for codes for weighted items and processing the payment on the shoulders
of customers rather than salaried employees. Banks strongly encouraged customers to pay bills and make
transfers online rather than in branches. Under this model, the customer played an active operating role in
delivering an integrated service through co-creation. However, customers were not very motivated to
participate in a do-it-yourself service if there was no specific financial, experiential or time-saving benefit
attached to it.
The car sharing business relied heavily on this concept since it would not be able to match the economies
of scale that the big car rental companies had achieved. In the car rental world, economies of scale were
critical in order to have sufficient buyer power for purchasing or leasing cars. Among car sharing
companies Zipcar operated a model where customer compliance — refueling, cleaning and returning
vehicles at specified time — was a critical element of the business system. In cases where customers did
not comply with the requirements (i.e., if they returned vehicles later than promised), Zipcar would
charge a $35 penalty. To add to the customer compliance element, Zipcar constantly reminded its
members that violating the communal obligations of the service would harm other members and would
ultimately undermine the overall system. The company often hosted events and introduced customers,
whom they empathetically called zipsters, to each other. Zipcar’s market research showed that from a
psychological perspective it was much easier to ruin the experience for some anonymous user than to ruin
that of another zipster that the misbehaving customer may have met at the last event.
Although car2go made many efforts to create community involvement among its members, the ability to
leave cars wherever a customer liked, plus a standard vehicle and automated check-in process, provided
much more individual freedom for car2go users.
CAR2GO RATES
Use of the car2go system cost 38 cents per minute plus applicable local taxes. Cars were also available on
an hourly basis for $13.99, which was more economical for rentals that exceeded 38 minutes. A daily rate
was available for $72.99. All prices included fuel, insurance and free parking in “residents only” areas or
designated car2go parking spots in downtown areas (see Exhibit 9 for a sample invoice).
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car2go rates, depending upon how the service would be used by an individual, were comparable to
national consumer reports on car ownership expenses. According to the Canadian Automobile
Association, the total ownership cost (including fuel, insurance, taxes and financing) per kilometre in
2010 for a Chevrolet Cobalt was 47 cents, for a Dodge Grand Caravan 69 cents and 54 cents for a Toyota
Prius. This estimation was based on a four-year ownership period and 18,000 kilometres driven per year.
In the case of an at-fault accident, car2go had a $1,000 deductible, making members financially
responsible for minor damage. car2go charged a one-time registration fee of $35, plus taxes, but when
entering a new city, the company often waived the registration fee as an incentive to attract new
customers. During launches in a new city, car2go also offered 30 free minutes of driving time to new
members. In addition, social media sites like Facebook were utilized for marketing purposes that included
special contests that frequently awarded free minutes of driving time to winners — ranging from 15
minutes to 500 minutes.
New members could enroll online or at local offices. The minimum age requirement was 18 (with a
student ID), and members were required to have three years driving experience and a valid credit card.
Members were also responsible for providing car2go with an official driving record from the local
licensing authorities. After successfully signing up, each member would receive a membership card and a
PIN by mail within five business days.
USING CAR2GO
Operating instructions were simple. A member could use a car2go vehicle either as an instant rental by
taking the first available car in the street or by placing a 15-minute advance booking. Available vehicles
could be located and booked online (up to 30 minutes in advance) on a computer or through a smart
phone application. If the member was late or did not show up for the booking, there would be no penalty.
To access a vehicle, a customer had to hold a valid membership RFID (Radio Frequency Identification)
card against a reader, which was installed in the windshield area, and after entering the individual
membership PIN the member could drive off. A touchscreen inside the car provided a navigation system
(which displayed points of interest such as fuel stations and designated car2go parking areas), eight preselected radio stations, an EcoScore App to show how efficiently the member was driving and an SOS
button that could be used to reach the car2go customer service team 24 hours a day. Extra options were
limited. There were no iPod or USB connectors for drivers to use, and at the time, there was no option to
scroll through radio stations.
Before starting the engine, the system would ask the driver to assess the cleanliness of the vehicle inside
and outside, and report damage. During the ride, the electronic system evaluated on a scale from 0 to 100
how environmentally friendly the driving style was and displayed messages for how to adjust to a more
calm and relaxed driving style if the driver’s EcoScore was low. car2go encouraged and rewarded safe —
and gas-saving — driving among its members. For example, a Facebook contest launched in Vancouver
in June 2012 offered 30 minutes of free driving time for posting a picture with the highest EcoScore.
Members could drive car2go vehicles as long as they liked and to whatever location they liked, except for
cross-country border destinations. When members wanted to return their car2go, they would park the
vehicle in any public parking space or at a car2go designated parking spot located within the designated
home area — a city zone covered by car2go service. Otherwise, the rental would simply continue.
Usually, the home area included only downtown areas and close-by residential neighborhoods. For
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example, in Vancouver, car2go served only the central city zone, but not nearby Burnaby, Richmond, or
North and West Vancouver.
With the free float system, cars naturally gravitated to where car2go members lived, worked and played.
This natural ebb and flow of the cars meant that, at times, there would be a concentration of cars in certain
neighborhoods; for example, those that were popular for dining and entertainment. In Vancouver and in
all car2go cities, the company employed a fleet team who would monitor the use of the 300+ car fleet.
The car2go fleet team would ensure that cars were not staying in one area for too long (after 24 hours, if a
car had not moved, the company would relocate the car to popular areas for car2go members).
As the volume of members increased and as usage of the service increased, car2go worked to expand the
home arrea when needed and eventually added additional cars to accommodate growth and demand. This
was a careful balancing act, since more cars meant higher fixed costs but also greater revenue potential,
while a greater number of fleet team employees would mean higher variable costs but a more flexible
buffering per vehicle utilization.
Availability was critical, as a loyal member explained when she canceled her car2go membership after
nine months:
In general, car2go was a good experience — cheap to use and cheap to join. But then I noticed
that too many people in my home area used car2go, and there were not enough cars available in
the morning. When I wear a business outfit for a meeting and sometimes have to walk ten blocks
for the nearest car — forget it, I’ll take a cab. 10
Although she enjoyed the bean-shaped smart and its parking ease, this former member decided to buy a
pre-owned compact car instead. She explained:
For me, a car is just a convenience, a commodity, so I go with the more practical option although,
averaging only $20 per month, car2go was much cheaper for me than owning a car, which costs
me now about $140 after everything is accounted for. I still take public transportation
frequently. 11
DECISION
Cole spent a few days reviewing the results of the Vancouver operations. Everything pleased him
including: high utilization rates, great reserved parking arrangements, and a monitoring and
communication system that worked without any glitches. Cole’s main dilemma was to decide which city
to choose next for the company’s Canadian expansion. Montreal had an established car sharing business
with Communeauto’s fleet of 1,150 cars. Edmonton and Winnipeg offered low competition, along with
attractive income levels. Victoria, with its large student population, limited public transportation and long
distances between island cities, had good growth potential but might require some adjustments to rates
and home area definition. Ottawa was another interesting destination to consider. Along with the location
decision, Cole had to decide what kind of marketing strategies car2go should deploy to ensure the launch
of the program would be a success in the next Canadian city. Cole knew that he had to move quickly
since rental giants Hertz and Enterprise were looking actively into joining the growing car sharing
business. In early 2013, Avis acquired Zipcar. car2go was on a mission to change modern urban
transportation and Cole and his team were prepared to lead the way (see Exhibit 10).
10
11
Author interview with Sohee Lim, former car2go member.
Ibid.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
Page 10
Page 11
9B13M110
Number of members (growing constantly)
Number of vehicles (growing with membership growth)
Utilization rate
Number of parking pads (and recently expanded home zone)
Average trip duration in minutes
Total revenue (case writer estimation)
Fee revenue (case writer estimation)
Vehicle usage revenue (case writer estimation)
21,000+
400
21%
52 (+ free floating)
30
$4,500,000
15%
85%
Source: Case writers and company data.
EXHIBIT 2: SMART FORTWO COUPÉ
The smart fortwo started production in 2006 as the second generation of the rear-engine two-passenger
car first introduced by Smart GMBH in 1998. The inception of smart created a new group in car
classification — city microcars.
The
smart
suited
urban
environments: with a width of 1.5
metres, a height of 1.5 metres and a
length of only 2.5 metres, this car had
a remarkably small turning circle of
8.5 metres (compared to 10.6 metres
for MINI and 10 metres for Toyota
Yaris). The European Union rated the
smart mileage as one of the best: at
4.7 litres/100 kilometres (60 miles per
imperial gallon; 50 miles per U.S.
gallon) for the gasoline model and
3.4 litres/100 kilometres (83 miles per
imperial gallon; 69 miles per U.S.
gallon) for the diesel version.
Recently, an all-electric version was
introduced.
The smart fortwo was one of the lightest cars on the market, with a weight of only 730 kilograms, and its
rigid steel frame, marketed as the ‘Tridion safety cell,’ surrounded and protected the riders. However,
according to ADAC crash test reports, smart fortwo (3 Stars Rating) was behind Fiat 500, Honda Jazz
and Toyota Yaris (5 Stars Rating for all three models) in terms of safety.
The Canadian manufacturer's suggested retail price (MSRP) for smart fortwo was $14,400 for the coupe
version and $20,500 for the cabriolet. The high performance Brabus versions of the fortwo sold for
$20,900 and $23,900 respectively. In 2012, Vancouver retailers offered two years of free gas with the
purchase of the fortwo model.
Source: Daimler Global Media; Daimler AG spells the ‘smart’ model name in lowercase.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
EXHIBIT 1: CAR2GO OPERATIONS IN VANCOUVER. 2012 RESULTS
Page 12
9B13M110
Basic proposition
Customers
Usage model
Car locations
Access to vehicles
Pricing
Reservation duration
Car Sharing
Alternative to car ownership for
people who don’t use cars often
Urban dwellers and commuters;
campus students and faculty
Membership/community based
Dispersed throughout urban
centers, neighborhoods and
campuses
Online, mobile apps; car doors
opened using smartcards or
smartphones; 24/7
All-inclusive pricing with parking,
insurance and gas included for
first 180 miles
By the minute, hour or by the
day; majority of reservations are
hourly, not daily
Car Rental
Cars for business trips, vacations or
insurance replacement
Business and leisure travelers;
owners getting their cars repaired;
some local residents
Transactional
Central depots at airports and other
geographic hubs
Counters, keys, contracts, store
hours
Gas and insurance options sold
separately
By the day, multi-day or week
Source: Zipcar presentation by Scott Griffith, Zipcar’s Chairman & Chief Executive Officer at Jefferies Global TMT
Conference, May 7, 2012; http://files.shareholder.com/downloads/ABEA-48TM4M/0x0x566810/8c39190c-285d-480c-8176c1d778fa9e39/Jefferies_May_7_2012_FINAL.pdf&sa=U&ei=qfGZUt6tLeWu4QSmz4HACw&ved=0CCcQFjAC&sig2=n4BKo
WW85pNAYu61eakkyg&usg=AFQjCNEyPmRX9M1OnDKbFoxvmLM3_vK6bw, accessed December 15, 2012.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
EXHIBIT 3: CAR SHARING VS. CAR RENTAL
9B13M110
EXHIBIT 4: TOP 3 CAR SHARING OPERATORS (CSO) IN CANADA
Auto-Com
• The first Canadian co-op car sharing
service established in Quebec City in
August 1994.
• In September 1995, the same owners
established Communeauto Inc. in
Montreal.
• Communeauto was started as a for-profit
business, and in June 1997, it merged
with Auto-Com. As a result of the deal,
the merged company serviced Montreal
and Quebec City, had 44 vehicles and
596 members.
• In December 2011, Communeauto had a
fleet of 1,154 vehicles and 24,684
members in four cities (Montreal,
Sherbrooke, Quebec and Gatineau). The
company reported that the vehicles had
utilization rate of 50% (i.e., 12 hours per
2
day).
Modo
• Previously known as the Cooperative Auto
Network (CAN), Modo was founded in
Vancouver, British Columbia in 1997 with
just two cars and 16 members. Modo was
the second oldest car sharing organization
in North America and the first that started
using online booking.
• Operated as a local not-for-profit memberowned co-operative, in 2012, Modo had
over 9,000 members sharing more than
275 vehicles at 200 locations throughout
Vancouver.
TransLink,
Vancouver’s
regional transportation authority, supported
Modo through the provision of designated
parking pads at select stations along
Vancouver’s rapid transit line.
• The City of Vancouver also provided
special “Modo-car only” parking stalls in
densely populated neighborhoods. Like
Communeauto, Modo paid fees to the city
13
for parking permits for all of its vehicles.
Parking expenses varied depending on the
location of the parking pod. Phil Baudin,
Modo’s executive director, explained: “In
neighborhoods like downtown Yaletown,
which has very little parking space because
of the design of existing buildings, we can
pay upwards of $500 per month. Outside of
the core areas of Vancouver, though,
parking can be available at $30 a month.”
Zipcar
• Established in 2000 in Cambridge,
Massachusetts, Zipcar is the membership
leader in the North American car sharing
industry with over 200,000 members.
• Zipcar launched in Toronto in September
2006 and in Vancouver in April 2007. By
2012, the company operated 131 vehicles
in Vancouver and 450 in Toronto and had
over 15,000 members in Canada. Zipcar
offered more than 25 different cars,
including high-end vehicles such as MINI
Coopers and BMW’s 3 Series.
• Zipcar used a gender-neutral term ‘zipster’
to describe its members as those who
believe in cost-efficient transportation
solutions that are “good for the planet and
easy on the wallet.”
• Zipcar went public in 2011 although the
business had only one profitable quarter
since it began operating. Zipcar had never
had a profitable quarter prior to its $100
14
million worth IPO last spring. In 2011,
Zipcar posted a net loss of $7.2 million,
15
down from $14.1 million in 2010 . So far,
the company has accumulated losses of
16
$65.4 million , and reported another loss of
$3 million in the first quarter of 2012. Since
the IPO in April 2011, the company stock
price has dropped from $31 to less than
$10 in May 2012.
Source: Case writers’ summary based on company information from www.modo.coop, accessed January 1, 2013; www.zipcar.ca, accessed January 15, 2013;
www.communauto.com, December 15, 2012.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
Page 13
9B13M110
EXHIBIT 5: CAR SHARING OPERATORS IN CANADA AS OF EARLY 2013
Firm
Established
1994
1. Communeauto
2. Zipcar
2007
3. AutoShare
1998
4. car2go
2011
2012
2012
5. Modo
1997
6. Vrtucar
2000
7. Victoria Car Share
8. Green Earth Coop
1996
1998
9. Kootenay Carshare
2001
10. Grand River
Carshare & Hamilton
Carshare
11. Nanaimo Carshare
12. Options for Cars
13. PegCity Car Co-op
14. Regina Car Share
1998
2010
2009
2011
2008
15. Hertz on Demand
2010
16. Calgary Carshare
17. Carshare HFX
2008
Cities
Quebec, QB
Montreal,QB
Sherbrooke,QB
Gatineau, QB
Vancouver, BC
Toronto, ON
Toronto, ON
Vancouver, BC
Toronto, ON
Calgary, AB
Vancouver, BC
Ottawa, ON
Gatineau, QB
Victoria, BC
Kingston, ON
Kootenay area,
BC
Kitchener, ON
Cambridge, ON
Hamilton, ON
Nanaimo, BC
Toronto, ON
Winnipeg, MB
Regina, SK
Edmonton, AB
Calgary, AB
Calgary, AB
Halifax, NS
Number of
Members
Ownership
For-profit
For-profit
For-profit
24,684
4,000 Vancouver
11,000 Toronto
12,000
20,000+ Vancouver
12,000+
Toronto18,000+
Calgary
9,000
Number of
Vehicles
1,154
131 Vancouver
450 Toronto
300
Parking Stalls
94 Quebec
333 Montreal
13 Sherbrooke
15 Gatineau
160 Vancouver
200 Toronto
150
325
325
300
52 (+free floating)
167
39
275
200
1,800
100
72
Co-op
Co-op
575
550
22
20
20
N/A
Co-op
220
20
0
Co-op
225
Co-op
Co-op
Co-op
Co-op
N/A
230
103
30
For-profit
N/A
Co-op
Co-op
270
N/A
For-profit
Co-op
For-profit
Source: Case writers’ summary based on information from company websites.
5 Waterloo
9 Kitchener
4 Hamilton
2
11
4
1
3 Edmonton
2 Calgary
8
20
N/A
0
8
4
1
5
N/A
17
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
Page 14
9B13M110
EXHIBIT 6: MEMBERSHIP TERMS OF TOP THREE CANADIAN CAR SHARING OPERATORS
(PRICES IN CDN$, NOT INCLUDING LOCAL TAXES)
AS OF JANUARY 2013
car2go
Sign-up
fee
Deposit
$35 + $2 insurance annual fee
None
$0.38/minute
$13.99/hour
$72.99/day
Rates
Extras
Typical
trip cost (3
hours, 38
kilometres
)
Fleet
$0.45/kilometre after 200
kilometres per rental
No fee for late/no-show for
reservations
$1,500 unauthorized drivers fee
$25 — $50 unauthorized parking
$50 cleaning charge (i.e., pet
hair)
$50 unlocked car
$25 drained battery
$25 declined credit card
$400 lost key
$40 (the average rental for
car2go was just 30 minutes due
to the flexibility that the freefloating system allowed for).
smart fortwo
Zipcar
Modo
$65 annual fee
$25 application fee
None
$8 - $15.50/hour (Mo-Fri)
$8.75 - $16.75/hour (weekend)
$72 - $102/day (Mo-Fri)
$88 - $118/day (weekend)
$20
$7.50/hour or $60/day rate applies for Casual
Membership plan (no deposit, $50 annual fee)
Lowest rate is for hybrid vehicles, highest
for a BMW.
Lower rates available for prepaid plans
$0.30/kilometre after 200 kilometres per
rental ($0.40 for BMW)
$55 for additional driver to the account
$750 accident fee
$35/hour for late returns
$30 gas left below ¼ tank
$3.50 agent reservation charge
$165 any violation fee
$46
Hybrid, SUVs, premium (25 models)
$500 (refundable purchase of co-op shares)
$0.40/kilometre for the first 35kilometre
$0.25/kilometre for each additional kilometre up to
150kilometre
$0.15/kilometre after that
$2 administration fee for the first three
bookings
$20 referral credit
Extra gas surcharge, once gas is over
$1.10/litre
$25 for late returns
$6 — $15 cancelations/no show for booking
fee
$35 unlocked car
$500 if the car is stolen
$10 gas left below ¼ tank
Smoking in vehicle = membership termination
$25 insufficient funds fee
$50 if vehicle is taken without reservation
$36
Compact cars, electric vehicles, trucks, minivans
Note: The fee structure for other coops and for-profit companies is similar, with minor differences in rates and extra charges.
Source: Company information, www.carsharingtoronto.com, December 15, 2012.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
Page 15
Page 16
9B13M110
Average Capital Cost
Revenue / Month
Cost / Month (Ex. depreciation)
Proceeds on Sale
Marketing Cost (50 members / Vehicle)
Internal Rate of Return (no financing)
Internal Rate of Return (financing 65% at 5% borrowing
rate)
$20,000
$2,000
$1,000
$10,000
$2.200
39%
81%
Source: Zipcar presentation by Scott Griffith, Zipcar’s Chairman & Chief Executive Officer at Jefferies Global TMT
Conference, May 7, 2012.; http://files.shareholder.com/downloads/ABEA-48TM4M/0x0x566810/8c39190c-285d-480c-8176c1d778fa9e39/Jefferies_May_7_2012_FINAL.pdf&sa=U&ei=qfGZUt6tLeWu4QSmz4HACw&ved=0CCcQFjAC&sig2=n4BKo
WW85pNAYu61eakkyg&usg=AFQjCNEyPmRX9M1OnDKbFoxvmLM3_vK6bw, accessed December 15, 2012.
EXHIBIT 8: CAR2GO LOCATIONS
Location
1. Vancouver, Canada
2. Calgary, Canada
3. Toronto, Canada
4. Austin, U.S.A.
5. Miami, U.S.A.
6. Portland, U.S.A.
7. San Diego, U.S.A.
8. Seattle, U.S.A.
9. Washington D.C., U.S.A.
10. Birmingham, U.K.
11. London, U.K.
12. Amsterdam, Netherlands
13. Lyon, France
14. Berlin, Germany
15. Dusseldorf, Germany
16. Hamburg, Germany
17. Ulm, Germany
18. Cologne, Germany
19. Vienna, Austria
Number of Members
21,000
15,000
10,000
20,000
7,000
3,000
6,000
8,000
1,800
Not launched yet
5,000
2,500
Service suspended
8,000
4,000
10,000
21,000
5,000
7,000
Number of
Vehicles
400
300
325
300
240
250
300 (electric drive)
350
200
250
500
300
200
1,200
300
300
300
350
500
Launch
Date
June 2011
July 2012
June 2012
May 2010
July 2012
March 2012
November 2011
December 2012
March 2012
Fall 2012
December 2012
November 2011
February 2012
April 2012
February 2012
February 2011
October 2008
September 2012
December 2011
Notes: car2go service in Lyon, France was suspended due to a trademark dispute. car2go offers electric vehicles in San
Diego. All information retrieved December 15, 2012.
Source: Company information, case writer’s estimate.
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
EXHIBIT 7: VEHICLE UNIT ECONOMICS (PER VEHICLE)
Page 17
9B13M110
car2go
854WDR
Trip Start
W 10th Ave
24, V5Y
Vancouver
11.18.2012
4:46 PM
Distance
(KM)
Destination
Nelson St 1177,
V6E
Vancouver
Time
d:h:m
4.00
00:00:20
Total Amount
Net
(C$)
HST
(C$)
Total
(C$)
7.60
0.91
8.51
7.60
0.91
8.51
Source: Case writer’s own material.
EXHIBIT 10: CANADA: LARGE CITIES COMPARISON
Population
(metropolitan
area)
Urban
density
Area
Share of
population
age 15 - 64
Median
family
income
Registered
vehicles per
1,000 people
Universities
Calgary
Toronto
Montreal
Edmonton
1.2 million
6.2 million
3.5 million
1.15 million
0.93 million
0.61 million
1,554.8 per
square
kilometre
726 square
kilometres
4,149 per
square
kilometre
630 square
kilometres
4,438 per
square
kilometre
365 square
kilometres
1,186 per
square
kilometre
684 square
kilometres
1,724 per
square
kilometre
512 square
kilometres
1,365 per
square
kilometre
464 square
kilometres
72%
70%
68%
70%
68%
65%
$89,490
$68,110
$67,010
$87,930
$81,040
$72,050
780
470
380
560
410
510
3
5
4
5
2
3
Source: Statistics Canada, www.statcan.gc.ca, accessed December 15, 2012.
Ottawa
Winnipeg
Authorized for use only in the course Strategic Management at University Canada West taught by Dr. Sherry Campbell from 7/12/2021 to 10/3/2021.
Use outside these parameters is a copyright violation.
EXHIBIT 9: CAR2GO SAMPLE INVOICE
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