Sharing Economy

DriveNow Accelerates Foreign Expansion

DriveNow PR
Germans aren't as excited about e-cars as BMW and DriveNow would like.
  • Why it matters

    Why it matters

    The German car-sharing market is becoming saturated and companies are looking to foreign markets for growth.

  • Facts

    Facts

    • DriveNow plans to launch in Copenhagen in September with a purely electric fleet made up of 400 BMW i3 cars.
    • Car sharing firms like DriveNow, Flinkster and Car2go are gradually hitting the limits of the market in Germany.
    • In Copenhagen, DriveNow is teaming up with a local franchise partner, Arriva, for the first time.
  • Audio

    Audio

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Car sharing, a self-service car rental system that allows drivers to hire cars by the minute, is a major new market for Germany’s auto industry. The only drawback so far is that it hasn’t been particularly lucrative.

But that’s changing, said Nico Gabriel, the head of DriveNow, the car sharing firm owned by rental company Sixt and luxury automaker BMW.

DriveNow has been making profits since the end of last year, at least in Germany, said Mr. Gabriel. The company is the third-largest in Germany behind Flinkster, operated by state-owned railway company Deutsche Bahn, and Car2go, run by Daimler.

Now it plans to speed up its international growth, and will launch a service in the Danish capital Copenhagen at the start of September. Copenhagen will be DriveNow’s fourth foreign city alongside London, Vienna and San Francisco.

The Danish fleet of 400 BMW i3 electric cars will be run not by DriveNow but by Arriva, a subsidiary of Deutsche Bahn. It’s the first time DriveNow is opting for a franchise model — until now, it has run all its businesses itself.

While combustion engine vehicles have an import tax slapped on them in Denmark, electric vehicles enjoy state subsidies.

“It’s a blueprint for us,” Mr. Gabriel said. DriveNow will provide its car sharing experience and technology, while the partner in Denmark will supply local expertise. Arriva, based in Britain, is Copenhagen’s largest bus operator and also runs a network of regional trains.

The new car sharing fleet will be hooked up with Arriva’s local services in Copenhagen. The navigation system in DriveNow cars will tell them in real time whether traffic conditions would make it quicker to opt for alternative transport. And at some point in the future, drivers will be able to purchase bus and train tickets in the cars.

That should help DriveNow challenge the common criticism that car sharing increases the volume of traffic in busy inner cities. The schemes allow drivers to pick up or leave cars anywhere in the city, using systems such as smartphone apps. They’re usually exempt from parking fees.

Car sharing has been growing sharply in Germany, especially in the big cities. But the firms are gradually hitting the limits of their growth and are looking to expand abroad where they see strong potential. In many cases, they need to find local partners.

“Expansion is above all a question of resources,” said Mr. Gabriel.

 

The Car Sharing Market-01

 

DriveNow is benefiting from the expertise of its parent company Sixt which has successfully expanded its business abroad using the franchising model.

“As a rule franchising is more complicated in car sharing than in car rental because the processes and technologies are more complex,” said Mr. Gabriel. “But when it came to setting up the contracts we were able to use many things we already had, so we didn’t have to reinvent everything.”

He added that DriveNow was very careful in selecting new cities because nothing was more damaging to one’s reputation than pulling out of a market after just a few years. He doesn’t think his new partners will drop out quickly if business initially fails to meet expectations. “We have arranged long-term contracts,” he said.

Copenhagen will be a test run to see how well the BMW i3 can be integrated into the fleet. If it performs well, BMW could use car sharing to revive weak sales of its electric cars.

 


Video: Behind the scenes at the DriveNow headquarters in Munich.

 

At present, purely electric car sharing programs like Multicity, run by French automaker Citroen, are having trouble gaining ground in Germany.

But it’s different in Denmark, where conditions for a wholly electric fleet are better, said Mr. Gabriel. While combustion engine vehicles have an import tax slapped on them, electric vehicles enjoy state subsidies.

The infrastructure for electric cars is also better than Germany’s, said Mr. Gabriel. Copenhagen will have some 600 charging points at the launch next month, and customers will be able to charge the i3 for free at them.

German cities of similar size lag far behind. The southern city of Nürnberg, for example, has just 18 charging points.

 

Lukas Bay is an editor with Handelsblatt’s companies and markets desk. To contact the author: bay@handelsblatt.com

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