A couple of weeks ago, Ford Motor Company somewhat quietly announced that next month, it’s beginning a leasing pilot program in Austin that will enable three to six people to lease a Ford Vehicle together.
It’s not alone in thinking about fractional car ownership. Audi is similarly trying out a fractional car ownership program called Audi Unite that allows up to five people to own a car together. (It launched, and remains exclusively available, in Stockholm, Sweden.)
A nascent startup in London called Orto is also entering the business of fractional car ownership.
The big question, of course, is whether the concept – which has been enormously successful when it comes to hotel time shares and private jets – can work when it comes to cars.
People clearly aren’t wedded to owning vehicles as they once were, partly owing to congestion and related parking challenges, and partly owing to the rising cost of cars, particularly as they grow increasingly sophisticated. It’s no wonder that car-hailing services like Lyft and Uber — along with car-sharing services like ZipCar and Getaround — have taken off like gangbusters.
Even General Motors, which estimates that there are currently six million people around the world using a shared-based model of transportation, thinks that number will grow four or fivefold between now and the end of the decade.
In fact, that foregone conclusion explains why GM, along with Ford, Audi and BMW, have recently begun testing out their own car-sharing services. They haven’t gone terribly well to date, though. While GM’s service is about to launch, BMW’s pilot program, called DriveNow, was suspended in its pilot city of San Francisco last November. The company cited the city’s parking policies as too big a hindrance.
We haven’t heard a whole lot about Audi’s on-demand program, Audi On Demand, either. The nine-month-old service chose San Francisco as its testbed, and it still hasn’t expanded out of the city. (For what it’s worth, Uber expanded out of San Francisco and into New York City 10 months after it launched its operations.)
Given these earlier initiatives, carmakers’ newer ideas about fractional ownership make a certain kind of sense. You can imagine, for example, people who might not like the idea of all the germs that invariably come with popular car-sharing services. Buying a car with a small group can be a similarly priced but cleaner alternative.
Fractional ownership also puts luxury cars within the reach of many more people. You can bet people would share Tesla Model S cars if the company came up with a fractional ownership scheme. In the meantime, two models that Orto plans to make available to up to four buyers per car are the prohibitively expensive Jaguar F-Type S and BMWi8. (Orto legally maintains possession of the cars, so its customers needn’t be bothered with the paperwork.)
Carmakers have even clearer incentives to make fractional ownership work. After all, convincing people to split the cost of owning or leasing a car is less risky than relying on fickle customers to subscribe to their car-share services.
Still, there are plenty of reasons why fractional car ownership could stall out before things get rolling.
Most obviously, it may remain easier to simply call up a car on a smartphone than figure out how to block out time or how much each co-owner or lease signee will pay each month. If you’ve ever shared a car with someone who does not live with you, as I did in college with my sister, you can easily see how conflicts might arise. (Note: No app existed at the time to help us in our scheduling endeavors, unlike today.)
Depending on who is handling the car’s maintenance, fractional car ownership can also be more costly than using on-demand services.
Even automotive analysts sound uncertain about whether fractional ownership can gain anywhere near the same traction as peer-to-peer car sharing and car-hailing services.
Martyn Briggs, a London-based mobility analyst at Frost & Sullivan, says he expects both “to grow for different reasons,” given that people have such varying needs. “Some people who take a trip once a month are likely to choose car-sharing, where someone who takes two or three trips a week may find fractional ownership cheaper than a car-share service,” he says.
Michelle Krebs, a senior auto analyst for AutoTrader.com, thinks what works longer term will “vary widely by location. The needs of someone in London versus Austin are probably quite different, so we’re going to see a lot of variations on this theme.”
Meanwhile, Max Zanan, an automotive retail expert with IDDS Group, says he’s skeptical that fractional ownership will become widely embraced. “If you’re a gazillionaire and you have multiple residences and maybe want a Ferrari in New York and an SUV at your disposal for when you’re in Colorado, that might make sense, but I’m not sure it will work for regular people like you and me. People’s schedules change too much.”
Zanan says he doesn’t blame carmakers, who he thinks are “panicking in general and trying every conceivable model because they’re trying to predict the future. They fear that Google or Tesla or Uber are going to disrupt their business model otherwise.” Still, he notes, “That doesn’t necessarily mean they are making good decisions.”