Sharing Economy’s Effect in the Auto Industry

The article posted on Mar 28, 2016 (http://www.bloomberg.com/news/articles/2016-03-28/how-sharing-cars-could-actually-boost-auto-sales) provides a unique point of view on the car sharing economy.

The traditional view is that auto sales will decrease with car sharing economy resulting in a negative effect for the manufacturing industry. A new paradigm is that a car sharing economy could have a positive effect on auto sales because of “empty legs” which means additional distance between one passenger and another. In New York City, UberX drivers travel almost half of the miles without a passenger according to the article.

In the contemporary scenario, each person drives one car. In the future, as adoption rates increase, the market size will grow by 1.2 car and consume 20% extra miles as empty rides between one passenger and another will add 10% to 20% more miles per drive. The life expectancy of on-demand vehicles is expected to be 3 years because of higher utilization. Sharing economy will increase demand for small sized cars.

How will car sharing economy transform the auto industry? How should the automobile business model be changed? What kinds of automobile need to be developed for the future?

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