Business, Finance & Economics

Could Car Sharing Work in a Place Like China?

Police-directing-traffic_Shanghai-e1357675890336.jpg

Credit: REUTERS

A policeman directs the traffic at a busy street of downtown Shanghai December 5, 2012. While the opportunities are vast in China's estimated $50 billion auto insurance industry, there are roadblocks aplenty - from poor driving standards to a new generation of car owners unfamiliar with the concept of buying protection against accidents and repairs. In 2010, China reported 3.9 million road accidents that killed 65,225 people and injured 254,075. For comparison, there were 30,797 fatal crashes in the United States in 2009, according to the National Highway Traffic Safety Administration, which has almost 2.5 times as many registered vehicles as China. REUTERS/Carlos Barria (CHINA - Tags: TRANSPORT SOCIETY)

When John Sterman, a professor at the MIT Sloan School of Management, looks at cars and transportation systems in the not-too-distant future, he doesn't like what he sees.

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"If everybody in the world drove the way Americans do today, then there would be in 2050 about nine-plus billion people, according to the UN, and those nine billion people would be driving 7.8 billion light duty vehicles."

And those vehicles would require five times the oil production as today, spewing out a lot more greenhouse gasses.

"And those cars would take up enough land that it would take an area the size of the whole country Bangladesh just for the parking spaces," said Sterman.

But what's the answer then if we all want cars? One thought: We share them. Sterman loves this idea. He says more people need to really think about what car ownership entails.

"The insurance, the registration, the taxes, the parking, the maintenance, all of that stuff that you that pay for, whether you're driving it or not," said Sterman. "Most people, especially in cities, are coming to realize: No, this is a terrible thing. It's hugely expensive to own a personal vehicle."

Here in Boston, as well as more than 50 other cities in North America, the UK, and Spain, you can rent a Zipcar by the hour or day. Robin Chase co-founded the company in Boston 13 years ago.

"We started with four cars and built it up from there," said Chase. Today, Zipcar has a fleet of nearly 10,000 vehicles and 760,000 members.

"Each car is used by 40 to 60 people, and of those people 15 to 20 sell or avoid buying a car," Chase said.

That's a lot less congestion and emissions.
An opportunity for global expansion

Last week, Avis bought Zipcar for around $500 million. With Avis'deeper pockets and vastly larger vehicle fleet, this could enable the Zipcar service, renting cars by the hour, to greatly expand.

Robin Chase is no longer affiliated with Zipcar. She's now working on another car sharing start-up in Paris and sees huge opportunities for growth in car sharing globally.

"I just spent the last two years in Paris, and throughout Europe, it's a given and accepted fact that cities are going to all become shared cars. Over the next 20 years that's what we will see. And as we think about Asia and in India, those densely-populated cities, American cities are 1/5 the population density of those cities."

And those already-crowded Chinese and Indian cities don't yet have that many cars either. David Friedman, the deputy director of the clean vehicles program at the Union of Concerned Scientists, said consider this: Right now, there are about 700 cars per 1,000 people here in the US.

"In China, there's about 44 cars for every 1,000 people. In India, there's even less, there's only about 12 cars for every 1,000 people," said Friedman.

"So there's a lot of room for China and India car ownership to grow. The question is: Are they going to take the US model, where we've saturated car use? Or are they going to adopt car sharing? So they don't follow the same path of congestion, pollution and poor air quality that we tried over the last 40 years as our car ownership exploded."
But do the Chinese want to share cars?

"Forget about it. No way. It's not going to happen. Unthinkable," said Michael Dunne, an independent car consultant based in Hong Kong. Dunne said in Asia cars are a social statement.

"It's an image factor, big image factor. So at the office you'd say, What kind of car are you driving? I'm driving a Honda. This guy over here has a Nissan. I have a Chevy. What about you? 'Well, I'm sharing a car with somebody else. Gee. Oh, you're sharing a car? That means you can't afford one.'"

But that doesn't mean attitudes can't change. People just need a nudge, said Susan Shaheen, the co-director of the Transportation Sustainability Research Center at the University of California at Berkeley. Her research shows that car sharing has been growing faster in the US than in Canada, for example.

"When we look at the difference between Canada and the US, US governments typically were much more supportive toward the car sharing concept in terms of grants, subsidies, access to on-street parking, and those types of things. So I think the role of the government is really important. And I think the signal, in particular, that it sends to the population in China is very important."

In Singapore, the government has been sending that signal: car taxes, tolls, and usage fees are making car ownership prohibitively expensive. It costs more than $65,000 just to buy a permit to own a car there. No real surprise: some car sharing companies in Singapore are now open for business.

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