BMW and Mercedes-Benz close to agreeing deal to merge car-sharing services

IHS Markit Perspective

• Implications: The BMW Group and Daimler are reportedly close to agreeing a deal to merge their respective car-sharing services, DriveNow and Car2G
• Outlook: The move could potentially provide critical mass for Europe's two biggest car-sharing services and provide a technology, infrastructure and marketing platform that could see the combined businesses accelerate growth and membership.

Daimler and the BMW Group are reportedly close to agreeing a deal to merge their car-sharing services Car2Go and DriveNow, a move which could have profound implications for the sector. A report by the German newspaper Frankfurter Allgemeine Zeitung was cited by Reuters. According to the report, the news agency spoke with an unnamed executive at one of the carmakers who said the talks were in their final stages, with the plan to pool both companies' assets and resources, including BMW's ParkNow parking app. The Frankfurter Allgemeine Zeitung newspaper reported, without citing its sources that both brands would keep their names, but their technology would be merged. It said a deal could be signed next month. The first reports of a deal to merge both businesses first emerged around a year ago but BMW's partner in DriveNow, traditional car hire firm Sixt, was supposedly lukewarm about the deal and its potential benefits, but now it appears that the two companies are close to an agreement for BMW to acquire Sixt's shares and branding rights.

Car2Go claims it is the world's biggest one-way self-drive car-sharing business with the company claiming in July of last year that it had reached a total membership of 2.5 million users. These members of the scheme have access to short-term hire of 14,000 vehicles in 26 major global cities in Europe, North America and China. BMW's DriveNow does not have the scale of Car2Go, although it is three years younger than its rival having started operating in 2011, with a fleet of 6,000 cars which are used in nine European cities.

Outlook and implications

There is no doubt that car-sharing services such as DriveNow have the potential to play a major part in the future mix of mobility services that will form the future offerings of traditional OEMs and technology businesses and could have the effect of radically transforming the landscape of the automotive industry over the next two decades and further erode the rationale behind the traditional model of car ownership. DriveNow and Car2Go typically offer young urban professionals the flexibility of being able to use a vehicle in a city environment for a short period of time, which fits in with their lifestyles. For these kind of users owning or leasing a passenger car outright is not a viable option due to cost, lack of parking or because they simply do not use a vehicle often enough to justify the outlay. It could be argued that both Daimler and BMW Group are actually supplying these young urban professionals a very viable excuse not to engage in that model and therefore potentially hurting what remains their core business. Another way of seeing it is these young urban professionals that make up the core of these businesses members are experiencing and interacting with Daimler and BMW Group product and brands in a way they probably never would have without car-sharing, and are therefore more likely to buy from these companies' brands further down the line. The vehicles typically employed by these companies, such as the Smart ForTwo in Car2Go's example and the BMW i3 and Mini, are also exactly the kind of vehicles likely to appeal most to this customer demographic as well as being suitable for the urban environment. If Car2Go and DriveNow do merge and combine their technology platforms and logistics operations, it could make compelling sense, creating an offering with vastly improved scale and reach. An expanded programme that uses the resources of both companies could also offer an ideal testing ground for both companies' future electric vehicle offerings and autonomous driving technology. And with the future megacities likely to impose more and more restrictions on car access to urban environments, car-sharing services, ride-hailing and shared ride hailing services are only going to grow in their importance in terms of the future mobility mix. A merger of DriveNow and Car2Go could allow Daimler and BMW Group a potential leadership position in the sharing space.

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