If you have decided to launch a car-sharing startup, you’re likely to have a business penchant. According to McKinsey, car-sharing services have been opened in about 1,000 new cities over the last few years, creating 47% growth in the industry. Just imagine how many locations still need car sharing and how endless future opportunities are. All you need is to turn your idea into a live service.
Source: Car sharing market statistics 2019-2026
How to start a car-sharing business?
Every business starts with highly detailed research and planning. You need to see the entire framework before starting the development. Here is a basic scheme of how to start a car-sharing business:
- Find your niche: define what type of car sharing you’d like to provide.
- Choose a business model and create a business plan: estimate the launch and growth scenario and revenue model.
- Prepare physical infrastructure: vehicles, parking, fuel, etc.
- Create the best app for car sharing for client attraction and retention. Preferably choose a software provider with specific expertise in car-sharing technology.
If there are much competition and almost zero chance to build a profitable and popular car-sharing service in your area, expand your thinking. A few companies noticed a big problem of Uber: while anyone who can drive and has a car can join Uber, many customers are concerned about trusting their lives to an unverified driver. As a result, there are ‘Uber for kids’ services that perform thorough background checks for each driver before hiring. Security and car reliability are the advantages that are still missing in many car-sharing companies.
This is just a sample of how an occupied niche (at first glance) may have free spots. Choose yours.
Major car-sharing business models
1 Free-Floating with pool station
You select a car from a pool station and make your trip. Then you return the vehicle to any company station. Currently, this business model is used mostly by electric vehicle providers — the latest car-sharing trend. However, the distance traveled is limited by battery life. It also limits customers by the need to return a car to a specific location. It is a good choice for long-distance, inter-city traveling. You take a car in one city and return it to another.
2 Free-Floating with an operational area
A customer picks up a car nearby, drives to their destination, and leaves the rented vehicle anywhere in a defined area. This car-sharing business model brings the most mobility to a customer. You can make one-way trips and park a car anywhere you find comfortable. However, it is more suitable for small distances within an urban area.
Source: 2019 car-sharing industry statistics
3 Roundtrip home-zone based
This type of car-sharing implies returning a car to the area from which it was taken. The vehicle can be parked at any spot within the valid home zone. It is very popular for local car sharing in the neighborhood. There’s no option to make one-way trips.
4 Round-trip station based
This is how car sharing started. You take the car from the station, and after you’ve made your trips, return it to the same station. It is the least flexible car-sharing business plan, as it limits customers both in freedom of travel and car return options.
5 Peer-to-Peer (P2P)
P2P car sharing operates similarly to roundtrip. The only difference is that here car owners rent out their own cars. It is more of a car-sharing app business model, as the entire business is based on a mobile sharing application that joins car owners and renters. The organization doesn’t need its own vehicle fleet or other investments except for the app development (both for iPhone and Android) and its maintenance.
Here are how these five types of car-sharing models relate to each other regarding flexibility and available distance to ride. Flexibility here means the diversity of car choices, parking areas, other service options.
Source: The comparison of car-sharing business models in the relation of Flexibility and Distance
Car sharing revenue models
The revenue model is an integral part of a car-sharing business plan that defines how your revenue and profit will be built. It also gives the ability to calculate the budget, cost recovery, and figure out the customer retention model. Most of the car-sharing companies use one of the following models:
- Subscription-based: customers pay a monthly/annual fee for membership, and additionally pay hourly/daily for a car taken
- Pay-as-you-go: no membership fees, paying just for the time you use a rented car or a distance in miles
- Non-profit: also called cooperative, when a particular community owns a car fleet, and community members use cars when they need them.
What business model is the best one?
The choice of a business model for your car-sharing startup depends on the desired scale, available assets, and your target market. Hopefully, this comparative table will help you to make the right choice:
Free-Floating with pool station
|Suitable for one-way trips, long trips, and electric vehicles;|
easier car stock management
|Need to reposition vehicles;|
lower coverage convenience due to pool stations
|Easy to scale business (city-by-city)||Users may prefer ride-hailing systems or car rental services|
Free-Floating with an operational area
|Flexible for users,|
no need for dedicated parking
dependable on local parking facilities
|Growth by extending the served area||Lack of scalability may turn to unprofitable operation|
Roundtrip, home-zone based
|Easier fleet management; suitable for low-investment approach||Territorial limitations (zone-limited); requires high demand within the home zone||Easy to scale (create multiple zones of service)||High competition; may be substituted by rental offers|
Roud-trip, station based
|Comparatively easy to manage the vehicles’ stock, suitable for electric vehicles||A part of customers may find stations inconveniently located; the served area may be limited by station location||Suitable for tourism, stations can be located in existing facilities like parks, dealerships, airports, etc.||Limited flexibility|
|Relatively low setup costs; a variety of car choices||Need to verify drivers; high dependence on the quality of the app||Lower service cost; maximally ‘on-demand’ character||Some user categories may prefer more stable systems|
Source: Comparison of car-sharing business models
Car sharing is an excellent idea for a startup, as this market is still easy for new players to enter. To gain success, choose the business model that fits your capital and territorial capabilities.