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Car Sharing Might Destroy the Auto Market

NEW YORK (TheStreet) -- Car sharing has moved beyond the "phenomenon" stage and into possibly historical territoriy -- becoming slayer of the U.S. urban auto market.

Recent data from Navigant Research says the car sharing market should grow from 2.3 million consumers last year to more than 12 million by 2020, especially as more larger, deep-pocketed service companies the market.

"Car sharing offers consumers the ability to enjoy mobility without the expense and hassle of owning a car, or the need to frequently rent a vehicle from a traditional car rental agency," says Lisa Jerram, senior research analyst with Navigant. "In addition, car sharing is viewed by both public and private entities as a powerful tool to reduce urban congestion and [bring] lower emissions of greenhouse gases."

Car sharing lets non-vehicle owners rent vehicles either directly through a provider or through a peer-to-peer network for an hour for a day or for a weekend.

Popular cars sharing services such as Zipcar charge about $9 to $12 per hour of usage, giving non-auto owners (usually living in large, urban areas) a fairly cheap way to motor around without leaving too much of a dent in their pocketbooks, and too large an eco-footprint on the environment.

Car sharing is so popular that some analytical firms are saying the unthinkable: The industry could threaten the financial viability of the U.S. auto market.

Alix Partners, a global business advisory firm, says in a study released Wednesday that car sharing services will "have a greater impact than previously thought on the vehicle market."

The study, which canvassed 1,000 customers in 10 major U.S. cities, reports that car sharing in those markets are displacing vehicle purchases at a rate of 32 to 1.

That's twice as much as researchers previously thought, and it's a gap that will narrow as more car sharing vehicles hit the market. To date, car sharing services have cut about 500,000 new vehicle purchases, and that number should rise to 1.2 million by 2020, Alix says.

That's a legitimate threat to the major auto makers, and to the major car rental companies whether they realize it or not.

"Our study suggests that Americans' willingness to avoid vehicle purchases due to growing car-sharing options is higher than many have thought, further suggesting that the auto industry ignores or minimizes this trend at its peril," says Mark Wakefield, director of Alix Partner's North American automotive practice. "While the approximately 500,000 vehicle purchases avoided to date is itself a large number, this study suggests that car sharing nationally could scale up as these 10 markets have, and if that happens, the impact on the traditional automotive market could be explosive."

The figures are alarming for the auto industry: 51% of car sharing consumers say they have avoided a new vehicle purchase because they can grab a car, cheaply, on short notice; 45% say they will never buy a new vehicle again, thanks to the "ease and convenience" of car sharing services.

That's true for young, urban consumers and, more ominously for automakers, for young families.

Car sharing is growing, and every forward step it takes cuts into the revenues of major automakers. If that continues, they're steps that could change the face of the U.S. transportation market.

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