FREE-FLOATING ALL-ELECTRIC CITY CARS

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1 FREE-FLOATING ALL-ELECTRIC CITY CARS The combination of a free-floating carsharing service and all-electric cars is attractive to both society and users. Free-floating carsharing services offer city dwellers a convenient mobility solution, while all-electric cars contribute to a fossil-free society and decrease oil dependency as well as particle and noise emissions. Car ownership in cities is associated with more and more concerns. Parking spaces are getting fewer and more expensive, and congestion is an exploding problem in most large cities. Public transportation is the solution in many cases, but sometimes a more flexible solution is needed. Carsharing services can be a flexible complement to public transport in cities. This type of service does not burden the users with high investment costs and it relieves them from the concerns of car ownership. A free-floating carsharing service can be the optimal offer for city dwellers. In a freefloating carsharing service users can find and return a car more or less anywhere within a given area, which means one way trips are enabled. This type of service is very attractive for users, and it also increases the utilization of the cars in the carsharing service, giving a faster payback on the operator s investment. A flee-floating carsharing service with all-electric cars will lead the way to increased all-electric car usage through a generally increased access to charging places, increased consciousness about the all-electric alternative among car buyers, and improved scale of economy in the all-electric car production.

2 THIS IS HOW IT WORKS Illustration: Stefan Pihlgren The customers are both private persons and employees on business errands. Typical private customers are people who have no car of their own, or families who use the service instead of owning a second car. For people living in city centers it is an added benefit not having to bother about parking. Companies may benefit from using the electric carsharing service instead of compensating employees for driving their own cars and supplying them with parking places. They can also add goodwill as a benefit, since using an electric carsharing service indicates care for the environment. Redistribution of cars is one of the main challenges for the operator of this business model. To minimize the need for having employees moving cars around, customers are encouraged to drop the car of in an area where there is a shortage of cars, rather than in an area where there is an excess of cars, by a specific reward system. The reward system gives the user a discount on the price of their next drive if the car is returned in an eligible area. To further reduce need for employees managing the cars the reward system can also encourage users to take the car to the carwash or to a service garage when necessary. The commercial potential of a free-floating carsharing service lies mainly in the fact that the cars in this service can be utilized much more than privately owned cars normally are. The high utilization in combination with the low driving costs of all-electric cars compensate for the high purchase price of these cars. Since an all-electric car doesn t contribute to local air pollution and since a carsharing car replaces 4-20 privately owned cars and hence help reduce car density per citizen, all-electric cars and carsharing services are beneficial for society, and there are thus reasons for public actors to contribute to increasing the attractiveness. This can be done by dedicating parking places in city centres specifically to electric cars and at low costs for carsharing operators, and by securing there are sufficiently many and well located charging stations. You go by taxi but you are the driver. That is how free floating carsharing works. As user, you pay per minute of use, and that s it. The typical customer is a city dweller who finds it increasingly annoying to own a car in the city but still wants personal mobility beyond what public transport and taxis can provide. With free-floating all-electric city cars, you don t have to pre-book, stick to a certain time interval or leave the car where you took it. A free-floating car sharing service is established within a designated city zone. Within this area, users may pick up and return the car on any public parking spot. To avoid empty batteries the user is required to return the car at a charging station and make sure it is charged if the battery charge is below a given level. The user pays per minute of usage and the fee includes all costs for electric energy, maintenance, road tolls etc. The customers book and have contact with the service through a smartphone, tablet or computer, showing where cars are located. The idea is that there should always be enough cars available for the users to mostly book just before use, i.e. the cars are not supposed to be reserved until shortly before they are used. However, it is also possible to reserve a car in advance. For using this additional service the customer is charged a specific reservation fee. To be able to use the free-floating all-electric city cars one has to be a member of the service. Membership is free of charge but requires going through a process meant to assure that members have the necessary drivers licence and that they really are who they claim to be. Visualization: Agnieszka Szymaszek You go by taxi but you are the driver. That is how free floating carsharing works.

3 BUSINESS MODEL IN DETAIL In this section the free-floating all-electric city cars business model is described based on the business model canvas 1 developed by Osterwalder et al. CUSTOMER SEGMENTS CUSTOMER RELATIONSHIPS KEY RESOURCES KEY ACTIVITIES The customers can be both private persons and companies. Typical private customers are people living in the city who have not yet bought their first car. Some customers might also use the service instead of owning a second car. Typical company customers have employees who mainly travel within the city, or within an area of about km from the city centre. Their different kinds of business errands often have an undetermined finish time, i.e. it is not possible to plan the return trip at the outset. KEY PARTNERS To be able to use the free-floating all-electric city cars one has to be a member of the service. Membership is free of charge but requires going through a process meant to assure members have the necessary drivers licence and that they really are who they claim to be. COST STRUCTURE The key resources for the free-floating carsharing service are; all-electric and/or plugin hybrid electric cars, charging stations, parking places, IT-system for booking, follow-up, invoicing and administration, decision support system to predict where deficit of cars can be expected and an IT-system used in the cars for finding charging stations, parking places and areas where the customer can get a discount when returning the car. DISTRIBUTION CHANNELS The key activities for the operator of this service are; purchase and maintenance of cars, securing access to charging stations and parking places, washing, cleaning and redistributing cars, enrolling members, advertising and to operate bookings, invoicing and follow-up. VALUE PROPOSITION The value proposition is access to an attractive all-electric car, only paying per minute of use. Within a specific zone a car should always be available at a maximum distance of 500 meters. The cars are kept clean and maintained by the operator. This business model will be more competitive with a producer of all-electric cars as a key partner. Other key partners may be charging system suppliers (of either traditional charging stations or inductive charging systems), IT suppliers (IT-system, car telematics system, decision support system) and energy companies (charging stations, connections, electric energy). Collaboration with the city in which this s service will be operating is also crucial. The all-electric cars will need access to attractive parking spaces and without support from the city this will not be possible at a manageable cost. The cost structure of this business model largely consists of costs for electric cars, parking, maintenance of the cars, insurance, electricity (from renewable sources), IT-systems, and personnel. One possibility for cost reduction is if users or companies can be encouraged to contribute by giving access, free or for rent, to their parking places. Another possibility is to minimize personnel costs for redistribution of cars by making it possible for users to get a discount by returning the car in an area where there is a deficit of cars. To be able to use the free-floating all-electric city cars one has to be a member of the service. Membership is free of charge but requires going through a process meant to assure members have the necessary drivers licence and that they really are who they claim to be. REVENUE STREAM The main revenue will come from rental fees. Since the cars will be highly visible within the city there is also a possibility to profit from using the cars for advertisements. The idea is that there should always be enough cars available, making it unnecessary for the users to reserve a car in advance, but to comply with business user needs it is possible to reserve a car, from 5 minutes up to a week, in advance. An additional reservation fee is paid for this service. For customers using the carsharing service both privately and at work, the costs can easily be split. 1 Available at (read )

4 BUSINESS MODEL SENSITIVITIES BUSINESS MODEL DEVELOPMENT A high utilization of the cars is the main tool to make a service like this better with all-electric cars than with internal combustion engine (ICE) cars since the lower mileage cost will then offset the higher purchase price. Because of the high utilization of the cars battery warranty conditions are the main financial constraints for the viability of this business model. This is due to that the residual value of a car has to be expected to be almost zero when the battery warranty ends. An extended battery warranty will therefore make the business case significantly more robust. The second most important factor for the profitability of this business model is that the city can provide low-cost or free parking for electric cars. A drawback of this business model is that it requires many cars already at launch. Customers will only be satisfied if they easily can find a car within a reasonable distance, about meter, and that the designated area isn t too small. This can easily sum up to a need of more than 100 cars, i.e. a significant investment and hence business risk. This business model is proposed by the BeliEVe project (Business model innovation for Electric Vehicles) as one of four business models having potential to contribute to a fast commercialization of electric cars in Sweden. More information about the BeliEVe project can be found at The concept of free-floating all-electric city cars is not new. Viktoria Swedish ICT was looking into this concept already in 2011, in a project called Framtidens elbilspool som lösning för personlig mobilitet i den hållbara staden. It should also be noted that free-floating carsharing services using all-electric cars are already operating in several cities; Car2Go for example offers this kind of service in Amsterdam (Netherlands) and San Diego (US). However, in Sweden there are no similar initiatives yet. Within the BeliEVe project the free-floating all-electric city cars business model has been further evaluated towards the Swedish market. This has been made through interviews with potential customers, representatives for potential operators and potential key partners, creating a greater understanding of the potential for this business model in Sweden. The sensitivity analysis has also been further developed based on the findings in the project.

5 SPONSORED BY: VIKTORIA SWEDISH ICT AB LINDHOLMSPIREN 3A, SE GÖTEBORG, SWEDEN