When selecting vehicles for sharing, it is impossible to find a one-box solution, because many factors influence the success of this business: from history to the infrastructure of the city. We discussed this topic in more detail in our last article.
In the new material, we collected the strengths and weaknesses of bikes, cars, and scooters to give an objective picture of the rental business.
Car sharing is the most popular type of rental business!
Car sharing is leading the transportation-sharing industry by a wide margin. It is turning into a new kind of public transport, helping to relieve traffic and improve the city’s ecology. For this reason, the authorities actively encourage such businesses’ development and provide parking fee benefits.
If we turn to studies, the expert on urban planning Donald Shoup has calculated that 95% of the time a personal car is idle in a parking lot or for service, and only 5% of the time is used for travel. And yet, 1 sharing car replaces up to 10 personal cars a day.
Customer portrait
The classic car-sharing user is a resident of the city center and other densely populated areas. Using car sharing for them is a great way to get to work or go on business without having to pay for parking.
Pros
- Active government support, which cannot be said of other types of sharing
- Steady growth in demand, turning the classic car rental, cabs, and even buying a personal vehicle into a relic of the past as economically unprofitable model of behavior
- High profitability in the range from 15 to 30%, which is slightly worse than the rates of other rental businesses. However, still strong compared to other venture capital industries, where an excellent result is considered to be 20%
- Ability to expand the fleet by leasing an individual’s car on a revenue-sharing basis
- High virality when promoting the service, i.e., business advertises itself through stickers on cars
- Absence of a seasonality factor, which is typical for other sharing services
Cons
- The main disadvantage of car sharing is the start-up capital from $500,000 and above.
- The difficulty of scaling the business outside metropolitan cities. After all, the demand for car sharing appears when the maintenance and use of private vehicles become too expensive. And this tendency is typical of big urban centers.
- The high cost of using: fuel, insurance, repair, maintenance, parking fees, and taxes.
- Frequent damage to the car up to stealing, which turns the vehicle into an illiquid commodity and forces to spend time on damage compensation. This problem is inherent in any type of vehicle for sharing, but in the case of car sharing, the amounts are much greater.
- Irresponsibility and dishonesty of drivers, due to which it is necessary to re-park or even evacuate the car. Property is also often missing from the cabin: phone holders, snow brushes, etc.
The scooter rental business is the most promising!
Scooters on rent is the youngest and fastest growing transportation-sharing industry in the world. According to forecasts, in the coming years, a real boom in demand for travel by scooter is expected, which is due to the change in the attitude of users to such services.
Whereas trips used to be perceived as entertainment, now the scooter is becoming a real alternative for moving around in big cities, where there is a lot of traffic and few parking spaces.
Customer portrait
The most active users of scooter-sharing services are citizens 18-34 years old. More than 70% of them are men. As a “working tool”, scooters are increasingly chosen by couriers of food delivery services and other representatives of the B2B segment.
Pros
- Low entry level to the market from $50,000
- No fee for the use of city infrastructure
- Very high profitability in the range from 30 to 50%
- The possibility of rapid scaling in cities with a population of 200,000 and more
- Opportunity to sell in B2B segment: large recreation centers, delivery services, etc.
- Eco-friendliness of transport
Cons
- Seasonality
- Dependence on the adaptability of urban infrastructure to micromobility
- High probability of injuries among customers
- The need for constant recharging or changing of batteries
- Acts of vandalism to vehicles
- Costs of scooter deployment and relocation from areas of low demand
- Possible resistance from city authorities amidst an over-saturated market and creating discomfort for pedestrians and drivers
- High cost of vehicle insurance
Bike sharing is a “Chinese miracle”!
The wave of bike sharing’s popularity began in 2014 when bike sharing became a sensation in China and received billions of dollars in investment. Since then, the industry has spread around the world, but the business has not settled everywhere.
The main reasons for failure vary from region to region. In China, for example, the market was saturated, leading to a veritable dumping ground for derelict bicycles, while in Europe the business suffered from vandalism and theft. Despite the problems, the industry continues to show a steady upward trend, and the leading companies have done a good job of correcting their mistakes, reaching steady profits.
Customer portrait
Here the customer portrait is similar to that of scooter users: citizens 18-34 years old, more than 70% of whom are men, as well as representatives of the B2B segment. Plus, they are joined by people who take care of their health.
Pros and cons of bike sharing
In general, the benefits and risks of bike sharing in many ways duplicate scooter rental, but there are some peculiarities:
Pros
- Low entry threshold to the market from $80,000
- No fee for the use of city infrastructure
- Very high profitability in the range from 30 to 50%
- The possibility of rapid scaling in cities with a population of 200,000 and more
- Opportunity to sell in the B2B segment: large recreation centers, delivery services, etc.
- Eco-friendliness of transport
- A more familiar means of transport for city dwellers
- Physical activity for sports fans
Cons
- Seasonality
- Dependence on the adaptability of urban infrastructure to micromobility
- High probability of injuries among customers
- The need for constant recharging or changing of batteries
- Acts of vandalism to vehicles
- Costs of scooter deployment and relocation from areas of low demand
- Possible resistance from city authorities amidst a floated market and creating discomfort for pedestrians and drivers
- High cost of vehicle insurance
- Bikes are less popular than scooters
- The market is over-saturated in many regions
- More frequent acts of vandalism, unlike other types of vehicles
- Poorly suited for office workers as a means of transportation
What types of vehicles to choose for rental business?
So let’s summarize:
- The most profitable rental is car sharing, but you have to be a millionaire or find investors to get into the business.
- The most promising type of rental is scooter sharing. What’s more, the entry threshold does not exceed $100,000.
- The conservative option is bike rentals. Their popularity is declining, but bikes are more familiar to many, which reduces the “psychological resistance to novelty” from the customer and the authorities.
Want to start your own rental? Write, call or submit the form, and we will help you realize your most ambitious ideas in your region!
