Why own a car?

Car rental Sixt wants to become the uber-Uber

main 84107663 source Andreas Gebert DPA – Sixt car rental auto Uber Daimler DriveNow BMW VW keys sharing
The key to the future of mobility, maybe. Source: Andreas Gebert / DPA

A top manager of German car rental company Sixt said the company is interested in creating an “integrated product” that would combine several mobility services. In an interview with Handelsblatt, Alexander Sixt said the Frankfurt-listed company has the financing and global reach to realize this vision. The great-grandson of the company’s founder, however, stopped short of saying which new services the 115-year old car firm could exactly launch. “In the future, we plan to offer services, which have so far been independent, under one roof and under one brand, connecting and integrating them,” the executive said.

Sixt, the largest European car rental company, announced last month the sale of its 50 percent stake in car-sharing service DriveNow to joint-venture partner BMW for €209 million ($259 million). Explaining the reasons behind Sixt’s departure from DriveNow, Mr. Sixt said that while DriveNow was successful, “car-sharing is only one piece of the puzzle in the mobility spectrum.” In the future, “current products such as car rental, ride-hailing and car-sharing will merge,” said the executive.

There might be another reason for breaking up with BMW: The luxury carmaker wants to merge DriveNow with Daimler’s car-sharing platform Car2Go, which offers Mercedes-Benz and Smart vehicles, according to media reports. Sixt, which is majority-controlled by the namesake family, had originally opposed such a merger.

“We want the reduce the private ownership of passenger cars.”

Alexander Sixt, board member of car-rental firm Sixt

For the time being, the car rental company will keep providing the software used to run DriveNow, which is known as ReachNow in the US. Technology is indeed crucial to the industry. Newcomers like Juno, Lyft and Uber have disrupted the auto industry’s business model by offering customers an alternative to vehicle ownership through smartphone-based ride-hailing services. Established firms such as Daimler and VW as well as Google’s Waymo have launched or operate a range of businesses, from car rental to self-driving vehicles to taxi apps and ride-sharing services. To date, however, none has moved to meld a range of these and related services on one platform and under one brand.

Mr. Sixt, who is in charge of strategy, procurement and car-sharing, said the firm with €2.4 billion in annual sales could create such a combined entity by drawing on its global fleet of 215,000 vehicles, its base of 30,000 customers and €1.2 billion in equity capital for financing. By comparison, DriveNow operates only 6,000 vehicles worldwide, while US rivals Hertz, Avis and Enterprise, including its brands Alamo and National, operate between 580,000 to 1.9 million vehicles globally.

Sixt, which has been expanding in the United States since 2011, views itself as a platform and technology provider. Third-party vehicles including private cars, for instance, could be offered for rent on a Sixt platform. The software that runs DriveNow could be used for such a service, according to Mr. Sixt . “We want the reduce the private ownership of passenger cars,” he said, adding that Sixt is testing a pilot program in Switzerland that allows customers to open their rental cars by smartphone and pick up them up from locations other than rental stations.

The German company has the advantage of both owning the software and the hardware to deliver mobility services, according to Mr. Sixt. “That is the big difference between Uber and other competitors: We control the cost base and therefore the value creation,” he said. “The others need to get a grip on costs; otherwise, losses accumulate on losses.”

Unless customers want to book a chauffeur — which Sixt offers under its MyDriver and Limousine Service brands — they’ll have to be patient for its new mobility services. The executive said he first wanted to close the sale of its DriveNow stake before launching new products. In the meantime, call a cab or take the bus.

Alexander Sixt, SIXT SE
Taking the wider view: Alexander Sixt. Source: Thomas Dashuber for Handelsblatt

Grischa Brower-Rabinowitsch and Markus Fasse reported this story for Handelsblatt. Jeremy Gray and Gilbert Kreijger adapted it for Handelsblatt Global. To contact the authors: brower@handelsblatt.comfasse@handelsblatt.com

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