Ford wades into the sharing economy with new car-sharing program (+video)(Read article summary)
As an increasing number of Millennial consumers opt for car-sharing over ownership, Ford is adapting to their needs.
Ford says it wants its customers to start renting their cars to others and changing the way they get around.
Applying the findings of recent research experiments, the automaker announced Tuesday that it will begin focusing on two new areas of mobility: flexible use and ownership, and multimodal urban travel solutions. The move is an attempt to adapt to changing consumer attitudes as research unveils that Millennial customers are open to sharing rides with others, and are interested in supplementing their incomes by renting their vehicles and other belongings.
“The sharing economy is really starting to impact the automotive industry, and it seems that especially volume manufacturers like Ford are picking up on this. It’s an exciting venture,” says Chris Travell, Vice-President of Maritz CX, an industry research company.
Last January, Ford launched a series of 25 experiments to better understand what its customers mobility needs are. The results demonstrated that young people’s interest in the sharing economy is seeping into the way they move around. One third of Millennials expressed an interest in renting their belongings to make some extra cash, according to a study conducted by the market research company Penn Schoen Berland. And young Americans ranked car rides as the number two item - second only to books- that they are willing to share.
In response, Ford Credit is launching a pilot peer-to-peer car-sharing program with two partners: the San Francisco-based start-up Getaround in the United States, and easyCar Club, a sister company of the low-cost airline easyjet, in London. Like an AirBnB for cars, the program will allow Ford owners to rent their vehicles to prescreened drivers when they aren’t being used. The program will begin in six US cities, Berkley, Oakland, and San Francisco in California, and Portland, Oregon, Chicago, and Washington D.C. In the United Kingdom the program will launch in London.
Getaround will be responsible for managing the app that customers in the US use to arrange their ride share.
While Ford already offered customers in the United Kingdom the opportunity to rent a car on a pay-as-you-go basis, this is the first time the company will allow customers to offset the expenses of their car payments by renting out their vehicles. Ford’s new experiment is emerging as the auto industry struggles to adapt to the demands of an increasingly urban population that is starting to question whether car ownership is optimal for their lifestyles, experts say.
“Ford's move into car sharing comes at a time when many in the auto industry are trying to find new ways to deal with the growing problems of congestion and mobility-on-demand services like Uber and Lyft,” wrote Phil LeBeau for CNBC.
“Those programs, along with successful car-share firms like Zipcar have some people who live in cities rethinking whether they need to buy a car. For many the answer is no.”
And while some have speculated that ride share programs could negatively impact a company’s bottom line, experts say that changing urban realities and consumer needs are forcing companies to innovate regardless of the potential risks.
“Realistically, the long-term implications for profitability remain to be seen. But the sharing economy is a reality, and the automobile industry needs to find ways to address that,” says Mr. Travell. “AirBnB is hugely successful. We cannot continue to cram vehicles into an urban grid and manufacturers need to find ways to address.”
A study released February by the business advisory firm AlixPartners found that 4.9 million people worldwide now use car-share memberships. That number is expected to jump to 26 million by 2020.
"We are seeing a lot of folks that don't want to own a vehicle, and we as a company want to make sure we are listening to customers and see if we can help in that regard," CEO Mark Fields told CNBC. "Customers, particularly in urban areas want access versus ownership."
Meanwhile, Ford is also reaching out to customers who may want to forgo the use of a car for part of their journey. On Tuesday the company announced that it will begin testing a reconfigurable electric bicycle that charges when stored in a vehicle. The bike will include an app that allows users to identify the most efficient and cost-effective mode of transportation, including a customized combination of car, public transportation, and bike. The app will also show real-time information about weather, traffic, and other hazards such as potholes.
According to the automaker, the bikes can be set on “no sweat” mode to increase electric pedal assistance based on heart rate so riders can avoid breaking a sweat. That means no more arriving at the office drenched after a stressful bike ride.
“Our goal is to make people’s lives better by helping them more easily navigate through their day, address societal issues and, over time, change the way the world moves – just as Henry Ford did more than 100 years ago,” said Mark Fields, Ford president and CEO, speaking Tuesday at the annual Further with Ford trends conference in Palo Alto.
“It’s really about human progress,” he said. “Mobility means freedom — freedom to live, work and play where we want.”
The bikes are still in their prototype phase and not yet ready for purchase.
Only customers who have financed their vehicles through Ford Credit, and not customers who own their vehicles outright, are eligible to participate in the car sharing program. Initially, the program will include 14,000 Ford Motor Credit customers in the U.S. and 12,000 in Britain. This initial experiment will last until November.
[Editor's Note: This story has been modified to clarify that Getaround will only manage the app in the US, not in the UK]