Recently, car sharing has become a very popular alternative to public transportation, taxi services, and even personal cars. It’s a short-term rental format for vehicles, which allows you to obtain a car for use with the help of a convenient mobile application.
This business has every chance of becoming profitable and successful, but to start your own company, you need to familiarize yourself with the specifics of this area of activity.
In this article, we will discuss the main components necessary for the successful launch of a car sharing business. If you pay enough attention to all the details, you can turn your business into a good source of income and offer quality service to your customers.
Benefits of car sharing
Car sharing is becoming an increasingly popular way of getting around the city, and there are several reasons for that. Here are some key advantages of car sharing that make it such an attractive service for many city dwellers:
- Environmental friendliness. By using car sharing services, consumers can significantly reduce their carbon footprint.
- Traffic improvement. One shared car used by car sharing customers can replace about 15 personal cars, which partially helps to solve the problem of traffic jams.
- Parking spaces. In big cities, finding a parking spot can be a huge problem. Car sharing helps reduce the need for additional parking spaces.
- Savings. Car sharing is more affordable than owning a car. Car sharing users don’t need to regularly pay for insurance, maintenance, refueling, parking, or cleaning. All these concerns fall on the car sharing service.
- Comfort. It’s obvious that short-term car rental provides much more convenience at any time and in any place than using public transport or taxi services.
Overall, car sharing has numerous advantages that make it an attractive option for many people looking for an affordable and eco-friendly way to get around the city.
The owner of the company also benefits from this business: such an enterprise can bring a steadily growing income, especially if you constantly improve the quality of service, use specialized car sharing software, analyze market trends, and take into account the wishes of the target audience.
How to open a car sharing company
Launching a car sharing service requires a responsible approach, in-depth market analysis, and competent planning. Here are several key stages that require special attention to create a successful car sharing business:
- Choose the type of car sharing: first, you need to decide which type of car sharing is best suited for your audience. This requires taking into account the class of vehicles in your fleet, average rental duration, investor presence, car specifications, and other parameters. Analyze the needs of your target audience to choose the most suitable type of car sharing.
- Choose a business model: once you have decided which type of car sharing service you want to provide, it’s time to choose a business model. Take into account your budget and determine which model is best suited for your business needs.
- Study the market and competitors: before starting your business, make sure you have done everything necessary by studying the activities of other companies, the dynamics of their development, pricing policies, technologies used, and customer experience, in order to clearly define your competitive advantage.
- Create a marketing strategy: after analyzing the market, it is necessary to create a detailed marketing strategy that will help highlight your car sharing service against competitors and be memorable to consumers. Use the most effective communication channels that are popular with your target audience.
- Address legal issues: pay special attention to all legal aspects, such as obtaining a license, purchasing or leasing vehicles, their proper registration, and insurance. This will help avoid many risks in the future.
- Establish a budget: after all legal issues have been resolved, it is important to create a detailed budget based on expected income, making it easier to manage finances. Ideally, regular expenses should not exceed one-third of expected income, leaving enough funds for unforeseen expenses.
- Optimize the business: to automate business processes, systematize accounting and reporting, and reduce risks associated with short-term car rentals, use corporate car sharing software.
Car sharing business models
There are various business models that can be used in entrepreneurship related to car sharing. The choice of the optimal model depends on the type of car sharing, your financial capabilities, and the availability of reliable partners.
1. Stationary business model.
Under this model of car sharing, vehicles are parked in specially designated places, usually at stations open to visitors. As a rule, customers are charged depending on how long they used the car. Payment is made online through a mobile application, for registration in which it is necessary to specify the data of a bank card. This model is popular because it is beneficial for customers who only need a car for short trips within a certain area.
2. Free-floating model.
This model implies that users can pick up and leave cars in any convenient place for them, if this location is within the service area. This gives customers greater flexibility. The tariff structure differs from that used in the stationary model, as free-floating is more suitable for longer trips.
3. From A to B business model.
This business model is based on providing car sharing services between two predetermined points. Customers order a trip online, specifying the meeting place, destination, date, time, and other details. After that, the program selects a suitable driver taking into account available seats, and payment, as a rule, is calculated for a one-time service, not for mileage or the duration of the trip.
Revenue models for car sharing applications
Car sharing services offer customers a wide range of payment models, which affects the company’s revenue. To choose the optimal revenue model for your car sharing application, consider the business model you have chosen for car sharing and the peculiarities of consumer behavior.
Thus, the most popular revenue models in car sharing are:
- Per minute. This is the most common way for car sharing applications to earn revenue. This model works best if customers often rent cars for a short period of time, as users are charged a fixed fee for each minute of rental. If the trip becomes longer, the cost of the trip increases.
- By mileage. This payment model is based on the number of kilometers traveled by the rented car. The length of time the renter uses the vehicle does not matter for this model. You can effectively use this model if your customers need cars mostly for long trips.
- By distance between stations. Some car sharing applications offer a payment system based on the distance between stations. The distance between the initial station and the destination is crucial in this case. With this pricing structure, users pay less if they return the car closer to the point where they started the trip.
Mistakes to avoid as a car sharing operator
If you are launching a car sharing business for the first time, you should know about common mistakes to avoid when working in this field. Here are the most significant ones:
- Ignoring legal requirements is perhaps one of the most dangerous mistakes, which can lead not only to financial losses but also to legal problems. Get the support of experienced lawyers to properly register your company, register your vehicles, and comply with all requirements provided by local legislation.
- Refusal to conduct marketing analysis is necessary to offer users a truly high-quality, unique, and modern service that the audience will definitely demand.
- Underestimation of budget needs. It is very important to forecast all one-time and regular expenses that you will have to cover in advance. Remember that the budget needs to include not only the purchase of cars and their maintenance but also staff salaries, office rent, insurance, and other expenses.
- Weak promotion. In the modern world, the success of a company largely depends on marketing methods, creativity, and the ability to interest the target audience. If you neglect marketing activities, all your efforts may be in vain because customers simply won’t know about the existence of your car sharing service.
- Refusal of modern technologies. Many companies use car sharing systems that significantly increase the efficiency of work. Install specialized software to manage business processes in the most convenient format.
- Uniform car fleet. Try to provide customers with as much choice of cars as possible to expand your audience. It is risky to form a car fleet only of electric cars or, for example, premium-class cars.
Car sharing business can become a profitable venture, but it requires careful planning and preparation. To open a successful company, you will need to acquire a fleet of cars and choose the most suitable business model.
You will also need to pay attention to many details: arrange the necessary documents, obtain insurance and all the necessary licenses, create a marketing plan, install car sharing software, equip the cars, and monitor industry trends. With a smart approach and planning, you can create a successful car sharing company that provides customers with an affordable, high-quality, and convenient service.