Sharing Economy for Cars May See Greatest Uptake in Developing Countries

By Mahbubul Alam, CTO/CMO, Movimento Group

Sharing Economy for Cars May See Greatest Uptake in Developing CountriesWhile developed countries get to test out and try the latest new technologies, reaping the benefits of each new phase of innovation from self driving cars to smart phones, going through the birthing pains of trying out new technology is not always fun. Think back to texting on early mobile phones or plugging desktop computers into dial ups – it was not always as productive as we imagined. Developing countries on the other hand, have an advantage: they can skip the awkward, intermediary stages of technological development and jump straight to the cutting edge.

 

This kind of leap is based on a combination of accessibility and infrastructure. It’s how places that never had landlines suddenly have access to video chat. And it’s an example of how the automotive industry can help create a sharing economy for cars that benefits the population and spurs new economic partnerships.

 

The Emerging World and the Mobile Tech Model

Across sub-Saharan Africa, for example, less than 2% of the population has a landline. 15 years ago, that would make long-distance communication virtually impossible – today, nearly 80% of the population has mobile phones, and 15% have smartphones, a number that is growing. This ability to skip traditional infrastructure has created an explosion of personal entrepreneurship and business opportunity. Consider China – despite having the world’s second-largest economy and third-largest military, it is still not classified as a developed country. However, it has the largest number of active cellphones of any country in the world, with over 1 billion users. It also has the world’s largest number of internet and broadband users, equivalent to around half of its population.

 

When we look at these countries, it’s not difficult to imagine that developing countries will skip the costly, time-consuming phases of car ownership and jump directly to the sharing economy which is ahead of us all. While countries have different ways of measuring “motor vehicles per capita”, by nearly every metric,  countries like China rank at the bottom. While the USA has 797 cars per 1,000 people, China, for example, has a mere 128 cars. And while owning a car is not absolutely necessary for a small business, access to reliable transportation almost certainly is. This is where automotive OEMs and self-driving technology can play a transformative role. Already, in America and Western Europe, OEMs and tech companies are considering new models of car ownership. As we see in Uber’s massive investment in self-driving cars, Zipcar’s car share or Teslas master plan including buses which passengers can summon on demand, many of automotive’s key players are interested in developing self-driving, on-demand fleets. In 2015, 8% of all adults had participated in some form of automotive sharing in the US and this is expected to rise.

 

Automotive OEMs and the New Model of Ownership Can Transform the Developing World

In this model, in developing countries an OEM would own all the cars in their fleet or sell entire fleets to smaller companies in those countries. The fleets would autonomously pick people up and drop them off, an always-moving flow of cars hailed by smartphones. The model would reduce waste and improve efficiency. This idea faces cultural obstacles in the West, especially in America, where the importance of having your own car is deeply ingrained. Letting go of the idea of ownership would require a cultural shift in the West but the sharing economy may see it’s greatest acceptance in countries like China where car ownership is not ingrained in the culture since vehicle ownership never really took off. In recent times, the production and purchase of cars has increased significantly in China, but still in urban areas, bicycles remain a common mode of transport.

 

In developing countries, the self-driving fleet model could enhance transportation without the prohibitive cost of buying a car. A business that cannot walk its goods more than a few blocks suddenly has access to a whole city and perhaps even an entire country. Having cars, and even trucks, available at reasonable prices, whenever you need them, would spur more growth and more innovation.

 

Another factor that lends well to the sharing economy in China is not one we would immediately associate with this country – the freedom of it’s legal system. In the United States, Uber has faced heavy litigation because it was seen as undercutting the established taxi industry. Uber faced fines and strict rules by city and state transportation boards. This, surprisingly, does not present a problem in China. China’s Ministry of Transport released draft policies in late 2015 seeking to regulate ride sharing services in all of China for the sharing economy. This shows a willingness by the Chinese government to embrace the sharing economy when it comes to transportation.

 

What’s the Road Ahead for Car Sharing?

With a population of over 1.3 billion today, China has the largest and busiest transit system in the world. Car sharing will emerge as a lifeline to urban populations that face growing smog and transit congestion. The need for businesses to get flexibly, quickly from one location to another will stimulate creative potential. In large cities, ride sharing will appeal to the new wealthy who don’t want to be burdened with car ownership. In rural areas, car sharing will impact communities who are ready for entrepreneurship, but don’t have transit. With investment, and a far-reaching strategy, automotive OEMs can be part of this economic growth.