The role of carsharing in urban transportation: current status, challenges, and future perspectives
Shared mobility can be defined as transportation services that are shared among users. During the last years, there has been a significant rise of shared mobility modes, including carsharing, ride-hailing, and micro-mobility services like scooter sharing and bike-sharing. Among these modes, carsharing represents a unique way of transportation since it provides a private, flexible and convenient mode of transportation for short periods (by the hour or minute), which may make this mode of transportation attractive for short-distance daily-needs trips. In a carsharing service, by using a mobile app, the processes of reservation, pickup, and return are usually self-service, and shared vehicles are typically distributed around cities, close to the users’ neighbourhood.
Carsharing may be part of a sustainable solution for the urban transportation problems, and numerous studies have reported the positive societal and environmental impacts associated with it. For example, several studies have shown that car sharing reduces car ownership and land consumption (e.g., the need for parking spaces) and decreases greenhouse gas emissions.
Carsharing and Mobility-as-a-Service in the urban transportation system
With the development of the Internet of Things (IoT) and emerging different modes of shared mobility, the urban transportation system is changing rapidly. One of the new developments in this area is the concept of Mobility as a Service (MaaS), which aims to integrate various modes of shared mobility that are operated independently from each other into one single application. Thus, users can plan, book, and pay for multiple types of mobility services according to their needs through an integrated platform (i.e., a mobile travel app). In this regard, several studies show that MaaS and shared mobility services can increase the efficiency of the urban transport system (Becker et al., 2020). The carsharing services play a pivotal role in the efficiency of MaaS by providing services in the areas that are not covered by public transport. In particular, carsharing can cover last-mile trips in a flexible and comfortable way and encourage people to use MaaS systems.
The potential benefits of carsharing for users and for the urban transportation network, as well as its connection with more environmentally friendly mobility choices, has led to an increasing attention. As a result, we have been witnessing a boom in both the number of people who use carsharing and the number of companies operating in this sector.
Carsharing market: current status and new players in the market
During the past decade, the characteristics of carsharing services have been continuously evolving. The main reason for these changes may lie in the fact that companies have different characteristics, business models, and strategies to attract new customers and achieve their financial and environmental goals.
There are five major types of carsharing (Lagadic, 2019). First, the Peer-to-Peer (P2P) model, in which private car owners make their car available for sharing with others, in a platform that is operated by a carsharing operator. Second, in the Business-to-Business (B2B) model, the carsharing company owns the fleet of vehicles and supplies the required fleet for a corporation, namely for work-related trips. Moreover, there are three Business-to-Consumer (B2C) models, namely round-trip, one-way station-based, and one-way free-floating. In these models, the carsharing company owns the fleet of vehicles that are shared among users with different policies. The round-trip service requires users to return the vehicle to the same station where it was picked-up, whereas in the one-way station-based model, users can deliver the car in a different station than the one where they started the journey. Finally, in the free-floating model, cars can be rented and returned anywhere within an operating area.
In recent years, some companies have started to provide more than one type of service (e.g., round-trip and free-floating services) to attract different customer segments. In this way, users can benefit from the advantages of different services according to their trip purposes. More recently, several companies started to provide hybrid models by combining the characteristics of two models. For instance, some companies offer a new hybrid two-way free-floating service by dividing the operation area into several different districts, which requires users to return the vehicle to the same district from where it was picked up.
Another innovation in the market is related to pricing plans. Companies are moving from single-tariff plans, based on time and distance, to increasingly complex models. In this regard, carsharing companies offer flexible plans with different rates during specific periods of the day and week to increase fleet utilization in low demand periods. Also, carsharing companies that provide one-way services started to offer a lower rate to motivate users to rent vehicles that are located in low demand areas and return them to the areas with higher demands. The structure of new pricing plans is also tailored for different customer segments. For example, plans with the higher rates for fixed costs (e.g., registration fee and monthly fee) and cheaper rates for variable costs (e.g., rental fee per minute) aim to encourage users to use carsharing to commute. In contrast, plans with lower rates for fixed costs (e.g., free registration fee) and the higher rates for variable costs seek to attract occasional users.
Carsharing companies have shown an increasing interest in the adoption of electric cars to attract customers with environmental concerns. Moreover, a heterogeneous fleet of vehicles allows users to select a specific type of vehicle (e.g., compact or cargo van) on an as-needed basis. They also try to enhance the interaction between users and services by developing new features on the user interface. In this context, some companies provide practical features in their mobile app, such as displaying the fuel or battery level of cars, which can help users reserve vehicles based on their travel distance needs and prevent inconveniences, such as refuelling during the rental.
In recent years, different companies are trying to grab this opportunity and enter the carsharing market. Aside from companies that do not usually have a background in mobility or transportation, we have been witnessing a growing interest among traditional car-rental companies and automobile manufacturers to enter the market. The traditional car-rental companies try to attract carsharing users by adapting their fleet and platform to the required technologies and providing flexible, self-service, and short-term services for users. The automobile manufacturers also seize this opportunity and emerge in the carsharing market supported by substantial financial resources, marketing positions, and the ability to acquire and equip their fleet with the required technologies for lower costs. For instance, most of the leading OEM companies, such as Daimler AG, BMW Group, Toyota Motor, General Motors, have launched their own carsharing services.
The importance of carsharing services and MaaS in the urban transportation system can be perceived in a recent $1 billion joint venture between Daimler AG, which owned car2go, and the BMW Group, which owned DriveNow (Hotten, 2019). The new joint venture focused on MaaS by developing ReachNow (previously Moovel) and allowing users to search, book, and pay for different modes of transportation. These two leading players of the market merged their carsharing services in a new service named ShareNow to achieve a competitive advantage in this highly competitive sector.
Carsharing in the academic literature
During the past years, the academic literature on carsharing has been growing rapidly. The existing publications in the field can be generally split into two streams. First, several descriptive studies have attempted to build an empirical body of knowledge about different aspects of carsharing, which can help researchers and practitioners to get acquainted with the motivations and settings of carsharing. In this context, a large number of descriptive studies have been conducted to investigate the market potential and social and environmental impacts associated with carsharing, as well as factors that affect customers’ decisions to join and use carsharing predominantly based on survey methods. Second, from a more quantitative approach, the existing papers have tackled different problems at strategic (e.g., station size), tactical (e.g., fleet size), and operational levels (e.g., demand modeling, vehicle stock imbalance, and pricing problems), mainly based on optimization and simulation methods.
Nevertheless, it seems that there is still a missing link between the business practices and academic literature, often due to the recency of this business and rapid changes in the market.
Challenges and future perspectives
Even though carsharing is a growing field and can be affected by several external factors in the future, such as the development of technology, the emergence of new mobility modes, and the adoption of autonomous vehicles, it is crucial to understand the current challenges and future perspectives of these systems. In this regard, three stakeholder groups may be considered as the main actors in the success of carsharing services and, as a consequence, the sustainability of urban transportation.
The first group comprises the carsharing companies and operators, which play a central role in the development of services. Designing a viable carsharing system is challenging, and often depend on a myriad of decisions. For example, as a long-term strategic decision, carsharing companies need to determine a suitable operation area, as well as the location, number, and size of stations and parking spots. The importance of this type of decision can be seen in San Francisco, where DriveNow ceased operation in 2015 due to the failure of providing free-floating parking spots for users (Korosec, 2015). As the mid-term decision, carsharing companies need to find the optimal number and type of vehicles (e.g., electric cars) as well as their distribution in the system to improve its performance. The importance of this decision has been reflected in the failure of Multicity carsharing in Berlin, where the company failed due to its small fleet size, which forced users to walk more than one kilometre to find a car (Sigal, 2017). The short-term operational decisions, such as pricing and fleet maintenance, also influence users’ decisions to opt for carsharing. Another major driver in the success of carsharing companies is related to the developments of MaaS systems. On the one hand, the developments of MaaS systems can help carsharing companies attract customers from other modes by developing proper features and strategies. On the other hand, a growing number of cities have more than one carsharing company, and the emergence of MaaS can increase the competition among them. For instance, in Berlin, users can compare the renting price of available carsharing services, including Miles mobility, and Ubeeqo, by using a MaaS app named URBI.
The second group includes the public sector, policymakers, and regulators. Carsharing companies per se might not be able to develop viable systems, and the collaboration between carsharing companies and policymakers (e.g., municipalities) can enhance the sustainability of services. In this regard, governments can support carsharing services through financial supports (e.g., subsidies), providing required infrastructures (e.g., charging stations for electric cars), and proper regulations (e.g., facilitated access to parking spaces). For instance, in 2016, Amsterdam’s municipality allowed carsharing companies to access all public parking spaces for a low yearly fee, helping the development of carsharing services in dense areas of Amsterdam (Lagadic, 2019).
The third group that can play a crucial role in the success of carsharing are scientific community and specialists in the field of carsharing. In this light, they can develop applicable models concerning realistic system requirements to enhance the performance of carsharing systems. Even though extensive research has been carried out, there is possibly still a “gap of understanding” of the scientific community concerning the business practices and contexts that may lead to oversimplifications of relevant problems. For instance, it seems that there is a lack of real data to evaluate the performance of proposed models, and some problems, such as fleet sizing and pricing schemes, are oversimplified in the literature.
INESC TEC and developing practical and realistic models
The Institute for Systems and Computer Engineering, Technology and Science (INESC TEC), in Portugal, is pursuing the development of relevant and practical models for carsharing services within the scope of project “SiuSMS — Smart (inter)urban shared mobility systems: integrating pricing and fleet management for a sustainable mobility planning future” (co-financed by FCT — the Portuguese Foundation for Science and Tehcnology — and the European Regional Development Fund). Due to the importance of the fleet and pricing schemes in the success and development of carsharing in urban transportation, our main focus is on integrating pricing and fleet management decisions.
To this aim and concerning the existing gaps between the business practices and academic literature, as a first step, we conducted a comprehensive business review to understand the carsharing market better. The business review analyzed the reality and the main features of 34 carsharing companies operating throughout the world with a specific focus on pricing and fleet of carsharing companies. In this way, and by conducting several in-depth analyses, we could deliver relevant insights into the main features of carsharing companies, which will help researchers better understand the ongoing processes and policies in the market. Building on this, we provide a database with real carsharing data that can serve as the primary source for future academic works. As the second step, to get a better understanding of the existing and state-of-the-art approaches in the literature, a holistic literature review has been conducted. The findings from the business review were also used in this work to introduce a conceptual decision-support framework and to provide a general perspective on the main decisions that are made in the design and implementation of a carsharing system, both from the perspectives of operators and users.
In summary, the SiuSMS project is working towards integrating business practices and requirements with a strong methodological background, especially focusing on fleet management and pricing models, to assist the development of carsharing services as a sustainable transportation mode.
Becker H., Balac, M., Ciari, F., and Axhausen, K. W. (2020). Assessing the welfare impacts of shared mobility and mobility as a service (MaaS), Transportation Research Part A: Policy and Practice, 131, 228–243.
Hotten, R. (2019). BMW and Daimler invest €1bn in new car venture [Online]. Available at: https://www.bbc.com/news/business-47332805
Korosec, K. (2015). What San Francisco taught BMW Group about car-sharing. [online] Available at: https://fortune.com/2015/10/12/san-francisco-bmw-car-sharing/
Lagadic, M., Verloes, A., and Louvet, N. (2019). Can carsharing services be profitable? A critical review of established and developing business models, Transport Policy, 77(February), 68–78, doi:10.1016/j.tranpol.2019.02.006.
Sigal, P. (2017). PSA closes failing Berlin car sharing [online] Available at: https://europe.autonews.com/article/20171120/COPY/311209992/psa-closes-failing-berlin-car-sharing
Short bio of the authors
The INESC TEC researchers Masoud Golalikhani and Beatriz Brito Oliveira have written this article in May 2020.
Masoud Golalikhani is currently a researcher at INESC TEC and he is pursuing a Ph.D. in Industrial Engineering and Management at the Faculty of Engineering of the University of Porto (Portugal). He received his Master degree in Industrial Engineering from the Qazvin Azad University, Iran (2015). His areas of research interest include topics in the domain of Optimization, Data Mining, and Simulation.
Beatriz Brito Oliveira completed the PhD in Industrial Engineering and Management in May 2018, Cum Laude, by the Faculty of Engineering of the University do Porto (FEUP). She is currently a Contracted PhD Researcher in INESC TEC and an Invited Assistant Professor in FEUP. She has published articles in top journals in the fields of Operational Research and Management Science. Within this field, her main application area is fleet management, revenue management, and pricing (and their integration) in mobility systems, especially in the car rental and carsharing businesses. From the techniques viewpoint, she is generally interested in quantitative methods to support real-world decisions in a time- and cost-effective manner, with a special focus on mathematical models, metaheuristics, and hybridization techniques, especially those that consider uncertainty issues.