The “carshare” business (free-floating, short-term rentals) is on the ropes. ReachNow is long gone. Limepod is closing its Seattle operation in December. The survivor, ShareNow (née Car2Go), is pulling out of 5 North American cities including Portland. A few weeks ago, ShareNow rolled out its $4.99 fee to park outside of high-traffic areas, and “up to” $4.99 credit to move it back in, in an effort to cover some costs. It’s enough for some to decide the business model is in a death spiral.
That would be a shame, because carshare has some societal benefits. It changes driving from a large fixed cost to an incremental one, which should discourage driving. It also eliminates one of the main objections to getting rid of a car entirely. So it’d be nice to keep these businesses around or create a public equivalent.
At the moment, we don’t really know if the business model is sustainable, because the current market is shaped by lossmaking “rideshare” providers flooding the market with cheap door-to-door service. As with anything unsustainable, this will one day end and leave one of three equilibria:
- Autonomous vehicles never materialize, and Uber/Lyft end up at more or less today’s regular taxi price point. There is plenty of space for carshare and bikeshare companies to be profitable, and regulation (to ensure equity, etc) can probably deny a chunk of those profits while keeping them in business.
- Self-driving cars arrive, and some combination of consolidation, deregulation, and patents minimizes competition. At more or less the current price point, investors actually realize their profit dreams. There is a market for carshare and bikeshare, but in a narrow price band that doesn’t allow for much profit.
- Self-driving cars arrive and become a commodity. Prices plummet. The carshare companies automate their cars, as the old model is doomed. Transit agencies can give up on coverage routes and focus on high volume corridors where they have traffic separation.
I have no idea how this will shake out — whether carshare and bikeshare will be enormously profitable, marginal, or completely irrelevant. What would be unfortunate however, would be to strangle these services with rules and fees while they are still marginal, creating the narrative that these models “don’t work.” Even if autonomous cars destroy the model, these companies, if they survive, are well-positioned to compete so that the benefits of new technology accrue to consumers rather than distant shareholders.