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Summary:

BMW Group is breaking into car sharing with a new pilot project in Munich that will let customers rent any current BMW model by the hour. It fits into much larger trends of innovation around providing mobility as a service — and growing competition for Zipcar.

BMW-mini-cooper

BMW Group is breaking into car sharing with a new pilot project called BMW on Demand. Announced on Friday, the program will let customers rent any current BMW model by the hour from the company’s event center in Munich, Germany. It’s starting small, but BMW on Demand fits into much larger trends of innovation around providing mobility as a service — and growing competition for the current car sharing heavyweight, Zipcar.

BMW on Demand is is set to run for a year, expanding in a second phase to additional locations in Munich, according to a release from the company. And the Wall Street Journal reports today that if the program is successful, BMW plans to eventually open rental sites in other European cities. Reservations can be made over the phone, in person or online, and hourly fees will vary based on model and time of day.

BMW vs. Zipcar

With its luxury brand, BMW is targeting a narrower slice of the short-term rental market than Zipcar, which provides models ranging from the Kia Soul to the Audi A3 to the Ford Escape, and markets its service, in part, as a money-saver. Like Zipcar, BMW says it will cover insurance, cleaning and servicing costs. In a key difference between BMW on Demand and many car sharing providers (Zipcar as well as smaller, regional organizations), however, BMW will have users pay for fuel on top of their rental fee. Whereas Zipcar users are charged for the full reservation period regardless of an early return, BMW on Demand says users will only be charged for the actual use period. And of course while Zipcar, which has never turned a profit, aims to build a business out of car sharing (and providing technology to fleet operators), BMW on Demand could be worthwhile for the German automaker if it helps generate interest and good will for BMW among prospective car buyers.

Surely there’s room for multiple players in car sharing and short-term rentals. That said, BMW’s entry into this market is a move that Zipcar can’t ignore. It’s none other than BMW’s Mini Cooper that is the most frequently requested model in Zipcar’s fleet, Zipcar CEO Scott Griffith said in a panel discussion earlier this year. And the high end in general is an valuable segment for Zipcar, serving drivers who may not be able to afford (or perhaps justify to a spouse) ownership of a luxury model, but will pay an extra few bucks per hour to get a swankier, sportier ride once in a while.

That’s precisely the customer BMW has in mind with this new service. According to the Wall Street Journal, BMW expects “many potential customers would choose models they perhaps couldn’t purchase outright—such as its M6 sports coupe, which has a U.S. starting price of $102,350—and rent them for special occasions.”

Automakers on the Move

BMW isn’t the only automaker moving into Zipcar’s turf. Daimler has launched a car sharing service called car2go, as well as car2gether, which is like the Twitter of rides sharing with a live feed of ride requests and offers. Peugeot, meanwhile, launched a program (“Mu by Peugeot”) in Europe last year for renting vehicles, bicycles, accessories like roof boxes, and other “mobility services.”

Automakers have compelling reasons to consider shifting at least part of their business to provide mobility as more of a service, including rising vehicle ownership costs, a global population that’s increasingly urban, and declining vehicle ownership among younger drivers. According to forecasts from research firm Frost & Sullivan, the number of drivers using car-sharing networks increased 117 percent between 2007 and 2009 in North America. Within five years, the firm expects to see 4.4 million people in North America and 5.5 million people in Europe sign up for car-sharing programs, more than tripling membership from 2009.

Sizing Up the Competition

Despite automakers like BMW experimenting with hourly car rentals and a crop of startups like Spride Share, RelayRides and WhipCar working to let consumers share their own cars, Zipcar considers traditional car rental companies like U-Haul, Enterprise and Hertz, which have recently jumped into the car sharing game, to be its main competition in North America. Rental car companies, Zipcar acknowledged in its S-1 filing in June, have better-known brands and heftier “financial, technical and marketing resources,” which could allow them to undercut Zipcar on cost.

For Zipcar, a key competitive strength is its current reach (it’s the world’s largest car sharing network, with some 7,000 vehicles and about 400,000 members) and a platform designed from the get-go to scale. Whereas some other car sharing providers have outfitted their vehicles with more hardware, such as hands-free phones and keypads for entering access codes, Zipcar developed a streamlined, largely automated system (including a “black box” device that receives data over AT&T’s wireless network and a platform for managing reservations, vehicles and payments in multiple currencies).

Mo’ Money, Mo’ Innovation?

Frost & Sullivan has forecast that by 2016, revenue from car sharing services could reach up to $3.3 billion in North America and €2.6 billion (about $3.2 billion) in Europe, up from up from $253 million and €220 million ($269.7 billion) in 2009, respectively. Zipcar shared a slightly less optimistic outlook in its S-1 filing, noting that it expects “the Frost & Sullivan market forecasts are more likely achievable by 2020.”

Those figures are helping to attract innovators from all quarters: car rental companies, universities, software startups, app developers and — as BMW on Demand illustrates — automakers. Some of these pilot projects and startups will, in all likelihood, eventually fold. But in these early days, we’re seeing an increasingly rich ecosystem of mobility service providers, which can only be a boon for the creation of alternative transportation options. As a bonus, adoption of car sharing services could also provide a jump-start for business models that use the web to share physical things.

Image courtesy of Flickr user Ryan Holst.

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  1. [...] BMW Rolls Toward Zipcar’s Turf With Hourly Rentals (gigaom.com) [...]

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  3. It sounds more like BMW is letting people take their cars out for an extended test drive, overnight and beyond. They’re only bothering to charge rent so they can collect demographic & financial data on potential customers and offset the cost of maintaining inventory that’ll eventually have to be sold as used cars rather than new. It could even be that they’re using rental charges to filter out the real potential customers from luxe-tourists who just want to drive a BMW for a day.

    As to Zipcar, there’s nothing stopping them from loading their fleet with BMWs if that’s what people want to rent. They already have Minis, Priuses, and other models a cut above the Ford/GM fare on display at a typical competitor’s rental lot.

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  4. [...] customers rent any current BMW model by the hour from the company’s event center in Munich, BMW Group broke into car sharing this fall. It wasn’t the only example of a big auto company moving into Zipcar’s turf in 2010. [...]

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