China’s Geely moves to export country’s car sharing boom

China’s recent boom in car sharing, stimulated by government actions, has drawn in foreign car makers including BMW and Daimler – in partnership with domestic auto makers. The remnants of Volvo, now owned by China’s giant Geely group, has also made waves through Lynk, a company billed as a joint Chinese-Swedish venture.

Lynk is now orchestrating a new trend to export China’s car sharing boom by launching new vehicles dedicated to the trade outside the country. Lynk has just launched its 03 sedan in Japan at the country’s Fuji Speedway, following the 02 crossover utility vehicle unveiled in Berlin March 2018, and the inaugural 01 sports utility vehicle introduced in Amsterdam in 2017.

All three vehicles were designed for car-sharing with Internet connectivity. The car sharing process is executed via an app that enables vehicles to be unlocked by users after gaining authorization, as well as for seeking nearby vehicles currently available for hire. Vehicles can be privately owned and need a GPS tracking device to provide their location.

Car sharing has evolved through three models, in line with technological development. First came the stationary model, where renters had to pick up vehicles from established stations either for round trips, or one way to another station if that option was supported.

This evolved into the peer-to-peer (P2P) model by adding tracking technology, which ditched the specific drop-off stations but still required users to pick up vehicles from owners’ premises, even though payment could now be made remotely via an app. This reduced capex and opex, while increasing scope for convenient one-way trips but still lacked the flexibility for cars to be rehired wherever they happened to be.

So P2P advanced into the free-floating model, where cars can be hired wherever they are and renters can find the one nearest them via their app, just as in ride hailing services like Uber. This is the prevailing model now and in China has driven rapid growth, so that the country is fast becoming the global ride sharing leader, propelled by government incentives as well as restriction on driving in most major cities.

Some areas have restricted car ownership by rationing allocation of license plates, such that in China’s “Silicon Valley” of Shenzhen only one in 300 people holding driving licenses can obtain plates needed by law to purchase vehicles. Given such draconian restrictions, it is not surprising that one factor encouraging car sharing has been commuters letting their vehicles out during the day to local inhabitants for shopping, social visits or other errands.

This comes at a time when China’s private car ownership still lags far behind developed Western nations, standing at 110 per thousand people at the start of 2017 – about 13% that of the US and 20% the average for Europe. Now it looks like Chinese private ownership will never reach the endemic levels of the West, and car sharing has been growing since 2015, when the government established targets, after a slow start. The Shanghai government, in February 2016, set a target for car sharing to achieve 6,000 service spots, a fleet of 20,000 electrical vehicles (EVs) and 30,000 charging poles in the city by 2020.

Free parking spaces were provided to car-sharing companies in government-controlled parking lots, with subsidies for operations and car-sharing platform development. In 2017 and 2018 that amounted to 30% the cost of parking spaces, charging infrastructure and electricity.

Until recently Daimler and BMW were the only non-Chinese owned auto makers with car-sharing fleets operating in the country. Daimler started its free-floating car-sharing in 2015 in Chongqing, while BMW came along at the end of 2017, in cooperation with EVCARD. This used EVCARD`s shared mobility app, operating 100 BMWi3 cars at 25 stations around premium residential and commercial areas. The other big players, such as Toyota, GM, Volkswagen and Renault-Nissan-Mitsubishi, have been seeking partnerships or deals to enter the Chinese car-sharing market, which looks on course to reach $1.5bn by the end of 2019.

Lynk has been tapping this growth, having sold around 74,000 vehicles during the first nine months of 2018, of which 20% were purchased online. When it started accepting online orders for the 01 SUV, it received over 6,000 orders in the first two minutes, claiming this broke the record for cars sold over such a short period. Lynk reckons that as car sharing appeals particularly to younger people its vehicles will register higher online sales than the average.

Lynk is also riding a trend towards testing car sharing in China first before launching elsewhere. Its present plan is to enter European markets only in 2020 followed by the US in 2021. Of course, there are other car sharing ventures outside China and Volvo itself separately plans to launch a new car sharing service based on a mobility vehicle dubbed “M” in Sweden and the US early in 2019.