No more queues

Car rental dynasty Sixt goes digital

Sixt
Will soon become a collector's item. Source: DPA

Sixt, a household name in Germany’s car rental market, is at a crossroads. Patriarch Erich Sixt, the 74-year-old CEO who has run the family-owned company for more than half a century, has turned it from a local car hire firm into an international player that has successfully expanded to the US. Now his sons Alexander and Konstantin are putting the finishing touches to a new service that will hopefully take on the likes of Uber.

It’s been dubbed Project One and Sixt has had 450 software developers working on the €100 million ($ 115.7 million) venture at its home base in Pullach near Munich, in Kiev, Ukraine, and in India.

The project will go live soon, starting at Munich and Düsseldorf airports, where drivers will be able to rent and start cars with their mobile phones — without having to go to any car hire counters. They’ll be able to rent the cars for just a few minutes, or for weeks. Some 20,000 of Sixt’s cars will be equipped with the new technology this year and in the long run, the company wants it fitted to its entire fleet of 240,000 vehicles.

It’s a watershed moment for Sixt, which was founded in 1912 and is an intriguing mix of a rigidly-run family firm and a modern, stock exchange-listed mobility group. Alexander, who is head of strategy, and Konstantin, who is in charge of distribution, have been working on a business model to prepare the company for the next decade, during which upheaval is predicted in both the car-making sector and for car-users.

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Ambitious plans: Konstantin (left) and Alexander Sixt. Source: Sixt

While their father is brimming with pride about successfully entering new territories like the US, the sons know that the mobile internet, not physical expansion, is key to the company’s future success. Sixt’s rivals are no longer just Europcar and Hertz — they’re Uber, Google and any number of fast-growing Chinese mobility conglomerates.

Sixt gave itself a head start by gathering valuable experience in the DriveNow car sharing venture that Alexander arranged with BMW in 2011. Its success surprised everyone including patriarch Erich who never thought “the Germans would ever share their cars with others.” But they did — and the two partners quickly established themselves in big European cities with the DriveNow service allowing people to rent vehicles spontaneously from any street corner.

But cracks emerged in the alliance. The auto giant wanted to launch the service in the US (where it is now known as ReachNow) and it wanted DriveNow to use lots of electric cars. In the end, BMW bought out Sixt for €209 million ($241 million), a princely sum for a joint venture that made a loss of €4 million last year. Now BMW plans to merge DriveNow with Daimler’s rival Car2go service.

Sixt has doubts as to whether they’ll succeed. The European market is satiated, the US has only four cities where car sharing could be profitable and Daimler and BMW together will only devote 20,000 cars to their venture, less than a tenth of Sixt’s global fleet. Additionally, the complicated software developed to take care of identification and invoicing belongs to Sixt and will stay with them, the firm owners say.

main 42458569 Tobias Hase DPA – Erich Sixt CEO of car rental company car sharing DriveNow app Car2go BMW Daimler Uber Didi Lyft
Not going anywhere: Erich Sixt. Source: Tobias Hase / DPA

The question is now when the patriarch will make way for his digitally-ambitious sons. The family owns 60 percent of the company and the two sons have been praised for their preparations for the digital future but will also have to take account of minority shareholders in arranging any succession.

Erich Sixt’s contract runs until 2020 but his successor should already be named at next year’s annual shareholders meeting. No one’s ruling out that he may simply continue. There’s no doubt that he’s satisfied. The expansion into the US, where Sixt has bases at almost two dozen airports and has just set up locations in Manhattan and on Hawaii, was one of his lifetime ambitions. More cars are rented in Orlando than in all of Switzerland, he boasts.

“The first half of 2018 was the best in our more than 100-year corporate history,” Erich Sixt concludes, in celebration of the company’s recent past. And there’s no doubt that, whether he is ready to retire or not, the future is looking bright too.

Markus Fasse reports on aviation and the automobile industry from Munich. This story was adapted in English for Handelsblatt Global. To contact the author: fasse@handelsblatt.com 

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