The unexpected complexity of car-sharing

Tuesday, 27 February 2018

by: Qurius

It was in 2011 that Victor van Tol founded Snappcar, a car-sharing company he might never have begun had he been aware of the complexity of its business model. Snappcar is nevertheless doing extremely well as the number two company of its kind in Europe, and number one in the Netherlands, with 1 million users and 50,000 shared cars. But expansion abroad is currently using up any profit, with acquisition, scale up, and aligning supply and demand locally proving difficult.

The concept is simple. A large number of cars remain stationary all day, and most cities would benefit from having fewer cars. So why not have car owners rent out their cars to people who need them, and let Snappcar take care of the logistics, including payment and insurance. They simply provide a platform and make optimum use of existing cars.

The concept works best in urban areas where there are enough cars (but not too many), good public transport (but not too good), and enough people who are willing to share or hire a car. Participants also have to live in close enough proximity to each other to make sharing practical, and car ownership must be limited yet sufficient. Snappcar has created rankings of suitable urban areas and now operates in the top 10 areas, 6 of which are in Germany.

One of Snappcar’s biggest challenges is supply, as many people are reluctant to rent out their cars. It has therefore introduced a lease system in Amsterdam that allows users to rent a brand new Fiat 500 for EUR 99 a month, provided they share it at least twice a month. This has solved the supply problem in Amsterdam, and the system will soon be introduced in Utrecht and Rotterdam too.

The lease system, however, although it may well prove to be profitable, does not fulfil the original objective of reducing car ownership. Van Tol is aware that the advent of driverless cars will change that, with sharing becoming the norm, and Snappcar’s future role remains unclear. The most likely outcome is that Snappcar will enter into a consolidation with peer-to-peer companies using a combined business model at first, and eventually exiting the market. But that’s for the future. For now, Snappcar plans to continue improving its business model, build a car-sharing community and expand within Europe, at least safeguarding its role in any forthcoming consolidation.

Translated and abridged from Victor van Tol (Snappcar) "Ik heb me vergist in de complexiteit van het model"

Read the original Dutch article here.