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Friday / 27 May 2022
HomeNewsBMW and Mercedes-Benz sell car-sharing app

BMW and Mercedes-Benz sell car-sharing app

In the car business, Carlos Tavares is seen as a turnaround whiz.

The chief executive officer of Stellantis, a self-described “performance psychopath,” bought Opel, the money-losing European operation of General Motors, and made it profitable in one year.

In 2021, Stellantis wowed Wall Street with an 11.8% adjusted operating margin, while integrating a global mega-merger and navigating the chip shortage.

Earlier this week, the French-Italian-American conglomerate announced it was buying Share Now, the car-sharing venture jointly owned by BMW and Mercedes-Benz, for an undisclosed sum.

Auto analyst Juergen Pieper estimates the price tag was around 250 million euros (R4.2 billion), based on estimated losses of 200 million euros (R3.3 billion) a year, as Bloomberg reported.

Car manufacturers’ track record in building new business models in the buzzy, ill-defined world of mobility is pretty grim.

And the austerity brought on by the pandemic as well as the cost of transitioning to electric vehicles has forced many to cut their losses.

GM pulled the plug on its car-sharing unit, Maven, in 2020. Ford ended its dalliance with electric scooter-sharing service Spin, selling it off in March.

There’s a long list of car subscription pilots that bit the dust: Cadillac Book, BMW Access, Mercedes Benz Collection, Audi SilverCar, Nissan Switch. (Porsche’s subscription service, starting at $1,700 a month, still is growing.)

So what is Tavares thinking? I spoke with Brigitte Courtehoux, a 21-year veteran of PSA who’s now the CEO of Free2Move, Stellantis’ mobility business, to better understand their strategy.

Free2Move has been at this since 2016, and it’s learned from its mistakes along the way, Courtehoux said.

A key downfall for car-sharing and subscription services has been the cost of maintaining and servicing vehicles, and exposure to the car’s depreciation as an asset.

For automakers used to booking revenue once a car leaves the factory, it’s been a painful lesson.

With Free2Move, Stellantis avoids those costs. “We don’t own the cars, we don’t want to own the cars,” Courtehoux said.

The app gives users what she calls a “seamless experience” that allows Free2Move to have “more customers, more revenues, and reduce our risk in terms of assets.”

The Free2Move app connects users to cars they can rent for a few minutes, hours, or days.

Most transactions come from rental car companies, who pay a fee for the referral. Another business bucket is dealers operating a fleet rental business — the dealers service the cars and eat the depreciation.

Free2Move manages its own car-sharing service in select cities where there’s enough utilization to cover costs.

Even then, it leases the vehicles from banks, who take on the depreciation risk, Courtehoux said.

So far, Free2Move has about 460,000 cars in operation in Europe and the U.S.; once the acquisition of Share Now is complete, it should have 5.4 million users.

And Free2Move turned a profit last year on revenue of 40 million euros (R678 million), Courtehoux said.

There are about 13.7 million users of car-sharing apps in the U.S. and Europe, excluding peer-to-peer platforms like Turo or Getaround, according to Shwetha Surender, an analyst at Frost & Sullivan.

If Courtehoux succeeds, she could deliver on a piece of the automaker’s ambitious strategic plan for 2030: A new, 2.8 billion-euro (R47.5 billion) revenue stream separate from the low-margin, capital-intensive manufacturing business that Wall Street pooh-poohs.

It could also provide the company with a network to deploy autonomous vehicles, something it’s already talking about with its self-driving partner, Waymo, Courtehoux said.

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