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BMW Pursues Daimler in Producing Profit From Car-Sharing

January 22, 2013

BMW Pursues Daimler in Making Car-Sharing Operations Profitable

BMW’s DriveNow, which is also active in San Francisco, has 77,000 customers and plans to serve 1 million drivers by 2020. Photographer: David Ulrich/Bayerische Motoren Werke AG via Bloomberg

Bayerische Motoren Werke AG (BMW) plans to earn the first profit in 2013 from a two-year-old venture that rents cars by the minute, potentially overtaking Daimler AG (DAI) in a push to make efforts to woo urban consumers pay off.

DriveNow GmbH, BMW’s car-sharing venture with rental company Sixt AG (SIX2), will limit expansion to focus on making money, Andreas Schaaf, the partnership’s managing director, said yesterday. After setting up in four cities in Germany since its May 2011 start, DriveNow is looking to add a location in the country and another elsewhere in Europe in 2013.

“We could expand quicker, but we want to prove that the business can be profitable,” Schaaf said in an interview in Berlin. “We look at profitability from city to city. There’s not a lot of economies of scale.”

Daimler and BMW are ramping up city-based services appealing to drivers looking for an alternative to owning a vehicle. Membership in car-sharing services may surge 20-fold to almost 15 million people in Europe by 2020, according to consulting company Frost & Sullivan. That would exceed the 12.5 million cars sold in the region last year.

The growth prospects led Parsippany, New Jersey-based Avis Budget Group Inc. (CAR:US) to bid $491 million for Zipcar Inc. (ZIP:US) at the beginning of this month.

“The participation of rental companies shows that car- sharing can and should be a profitable business,” said Marc- Rene Tonn, an analyst at Warburg Research in Hamburg. “For the auto companies, it’s about positioning themselves to address changing behavior of urban consumers.”

Earnings Dates

The earnings plan for DriveNow compares with a 2014 break- even target date set by Daimler for its Car2go service, which offers one-way rentals of two-seat Smart models by the minute. Car2go is profitable in three of the 18 cities where it operates, Daimler said yesterday. The Stuttgart, Germany-based maker of Mercedes-Benz luxury vehicles started the car-sharing service with a pilot program in Germany in late 2008.

“Car2go has clearly moved out of the experimental stage,” Robert Henrich, head of the carmaker’s newly created Daimler Mobility Services division, told journalists after a press conference yesterday in Stuttgart.

The new unit, announced yesterday, bundles Car2go with services for finding a parking space and comparing urban transport options, and it has a goal of generating 100 million euros ($133 million) a year in revenue by 2014.

Expansion Plans

Car2go’s fleet will almost double to 10,000 Smarts this year from 6,100 at the end of 2012, with the customer base targeted to jump to 500,000 people from 275,000 in the period, Henrich said. Munich-based BMW’s DriveNow, which is also active in San Francisco, has 77,000 customers and plans to serve 1 million drivers by 2020.

Daimler acquired a minority stake at the end of 2012 in GottaPark Inc., a San Francisco-based company that allows drivers to book parking places online in nine cities in North America, as part of the mobility division. Daimler plans to start the first European business with GottaPark this year.

Another Daimler Mobility offering is Moovel, a smartphone application that allows users in Berlin and Stuttgart to compare the cost and time needed for different methods of travel between two points in those cities.

Electric Cars

Car-sharing services also offer automakers a market to introduce electric vehicles to the driving public. Car2go has assigned more than 950 battery-powered Smart cars to six cities.

BMW’s DriveNow this year will roll out 40 electric-powered Active E models, converted versions of the carmaker’s 1-Series compact, in Berlin and 20 in Munich as part of a test of how customers deal with recharging vehicles.

In Berlin, DriveNow users will be asked to drive the car to a recharging station when the battery gets too low and receive a bonus as a result, while in Munich the company’s fleet management will recharge the cars overnight. The tests are to prepare for the introduction of the BMW i3, the manufacturer’s first electric vehicle, into the fleet after its rollout later this year, Schaaf said.

To contact the reporters on this story: Chris Reiter in Berlin at creiter2@bloomberg.net; Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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