Car Rental: A Paradigm Shift

Unprecedented urbanization demands better ways for people to move throughout cities and surrounding areas. Car rentals and car sharing may change the way we think about mobility. In an earlier post on the future of mobility, Matthias Bentenrieder showed that convenient access to alternative modes of transport is vital if people are to forego car ownership. Which innovations can make car rental more convenient and drive the change to a more sustainable mobility landscape?

 

What’s New in Car Rental?

Historically, the car-rental experience has been fraught with hassles. Customers complain about hard sells on a confusing array of insurance options, or being charged for difficult-to-disprove damages on return, both unique to car rentals. Rental company executives, for their part, complain about the low prices they can command in the market relative to, say, airline or rail tickets or owning a car outright.

But now the rental industry is poised for change. We are tracking dozens of innovations that may significantly change the way customers and companies approach mobility. Here are a few examples:

  • Resrobot – This integrated multimodal trip planner for the entire country of Sweden makes it easy to compare complex alternative travel options using various means of transport as car, subway, plane or bus. Resrobot can be accessed online or via a smartphone app.
  • Silvercar – Opening in 2013 at Texas airports, this car-rental company has a fleet of Audi A4s, uses smartphones to book, unlock, download itinerary to the dashboard, and deliver immediate receipts. It offers a person-free pickup experience for premium business travellers.
  • Waze – This free GPS navigation app is community based: It collects real-time user info to update traffic conditions, interruptions, and the like. It incorporates game elements to motivate users to contribute, and the positive feedback loop increases the quality of information shared. It is expanding services to include data on nearby petrol stations, restaurants, and cultural sites.
  • SFPark – Smart street parking meters in San Francisco report when spaces are empty, and this app directs drivers straight to open spots. Pricing is managed dynamically based on real-time demand. It is now being piloted across 25% of total city parking.
  • Hertz CRVIS – Short for Car Rental Vehicle Inspection System, this service from Hertz inspects cars by taking 70 automated photos as they leave and enter lots. Piloted 2009 in the United States and in use at 3 locations in 2011, it addresses one of the largest customer complaints and reduces customer service time and legal costs.
  • DropCar – This start-up offers software for optimizing one-way car-sharing and algorithms to rebalance fleet distribution and create dynamic pricing incentives.

These innovations are not only making car rental convenient, they are also generating significant economic advantages. Further, increased efficiencies in access to alternative transportation options pave the way for globally reduced greenhouse gas emissions levels, as well as local impacts on reduced particulate air pollution and less congested streets.

Car Demotion, Gadget Promotion

Industry executives, from car-rental companies to OEMs, are asking how these changes will affect their business models and product offerings. The overall trend is an increasingly integrated and connected car experience. That means that the car may lose its starring role as the primary mobility asset as a host of surrounding technologies and gadgets begin to share the spotlight.

Many of these innovations depend on gadgets and additions to the car environment. Some are purely software, but many involve plugin devices to track position, communicate with a home server, connect with nearby smartphones and tablets, and feed instructions to the car itself. The biggest question is who will develop, own and contribute these new gadgets and assets. Will it be the OEMs or new, large entrants like Google and Microsoft? Or will crowdsourcing take a front seat, with app marketplaces crossing over from the digital to the physical? And how will these developers offer their products – through traditional sourcing channels, through partnerships, or directly to customers?

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The rise of gadgets also introduces challenges to the product lifecycle. Rather than having one car that is serviced every X months and replaced every Y years, there will be over a dozen products, partially integrated, that required data updates, firmware upgrades, servicing, and replacement, all on different cycles. A large piece of this puzzle will be standardization – the success of Apple’s app marketplace depends on attracting developers with the promise of a simple, common design environment. But cars have been moving in the opposite direction, with more customized, unique, and proprietary embedded IT systems that only licensed technicians can hope to service. Will OEMs make the leap to providing standardized interfaces and languages? And if they don’t, will they be able to keep control or will another group force the issue?

Evolution or Revolution?

What do you think: Is the car industry facing a step-change transformation? Or just the regular progression of incremental growth?

About Michael Lierow

Michael Lierow is a partner at Oliver Wyman for sustainability & resource productivity and transportation, based in Munich. He has 14 years of consulting experience with a special focus on efficiency programs and network optimization of CEP, LTL/FTL and supply chain companies. Michael supports clients to unlock growth through clean-tech and sustainability solutions by combining economic growth and environmental awareness, especially in the areas of energy, infrastructure, mobility, transportation and waste. He has developed numerous concepts and co-authored articles on efficiency in logistics and sustainability next to frequently speaking at international conferences such as at the World Climate Summit in Cancun/Mexico and the Sustainable Supply Chains and Shipping at Basel Finance.

Michael studied Business and Economics at the Otto-Beisheim Graduate School of Management (WHU) in Germany, France and Australia. He holds a PhD and a MBA and is fluent in German, English, Spanish and French.