Sharing economy: The road to a sustainable future via digitalization

During 2021, a total of 66.7 million cars were sold across the globe. The above statistics show that roughly 2.6 million of those cars are running as you’re reading this article. But what if the cars’ utilization percentage increased?

Imagine we had been able to double car utilization from 4% to 8%. In theory, only half the number of cars would then have been sold during 2021. In practice, this would probably not be the case, but increased utilization would definitely affect the amount of cars produced and sold worldwide.

Airbnb: sharing economy in action

Increasing asset utilization is not a new idea. One of the most famous examples is Airbnb. As of December 2021, Airbnb had 12.7 million listings in its database; 356.9 million bookings were made during 2021. Across all Airbnb listings, the average Airbnb occupancy rate globally in 2021 was 17.4%, up from 11.5% in 2020.

This area of the sharing economy has been growing for many years, and the trend shows no signs of slowing down. Would we have built more houses/hotels if we hadn’t been sharing them with each other? The answer is probably yes, though we don’t know how many more.

An Airbnb for cars

So, how about creating an Airbnb for cars? It’s already been done. In 2018, a new member of the Zhejiang Geely Holding Group, Lynk & Co, was launched. The very same year, the new brand sold more than 120,000 cars, all in China, making this the fastest-selling new car in history.

Gaining confidence from this success, Lynk & Co decided to launch in Europe, but this launch was to be different from the Chinese one. One of the key messages and selling points was car sharing: being able to lend your car to people in the Lynk & Co community when you are not using it yourself.

Let’s take Jenny as an example. Jenny lives in the countryside but works for a company in the inner city. Every day, she commutes to work with her Lynk & Co 01, which she parks down the street, normally from 8am to 5pm. Using the Lynk & Co mobile app, she can make her car available to the community, set a rental fee, and state where people can park the car at the end of the rental period.

Secure sharing powered by digitalization

The Lynk & Co experience shows that an Airbnb model can be applied to vehicles. But, you may ask, how does it deal with the risks of renting your car out to someone else – for example, the risk of theft? What are the implications in terms of insurance? And what about cleaning?

Lynk & Co addresses these concerns in several ways. First, to be a member of its community, you need to register with your personal ID, driver’s license, and insurance details. Second, Lynk & Co cars are equipped with advanced telematics and connectivity, making the rental process more secure for the owner. And last but not least, all community members get a star rating of between one and five from vehicle owners based on their behavior. In other words, people who misuse cars will have a harder time renting one in the future. The same goes for those renting out their cars. If a car isn’t clean, they will get a lower ranking from renters, and therefore have a harder time earning money from that car.

This disruptive and experimental concept was launched in Europe during 2021 and is still in its infancy. However, one thing is certain: The idea is challenging the whole industry around car ownership and usage.

It’s exciting to consider how this new business model could develop. Will we see collaboration between different OEMs so that a driver can rent multiple car brands and benefit from the same telematics and connectivity-enabled security for all of them?

Accounting for 7.1% of total greenhouse emissions

Now, let’s consider sharing from a sustainability point of view. Globally, human activity generates around 50 billion tonnes of greenhouse gases each year. In 2020, 11.9% of total emissions came from road transport. Of those, 60% result from passenger travel and the remaining 40% from road freight. This means that 7.1% of global emissions arise from passenger transport vehicles.

To put that into perspective, 7.1% is more than 3.7 times as high as the aviation industry’s CO₂ emissions, which represent 1.9% of the total. If we factor in the additional carbon emissions from producing the 66.7 million cars made in 2021, you can see that the total impact is massive.

So, how do we reduce those emissions levels? Let’s return to our example. By sharing her car, Jenny might be able to increase its utilization from the average of 4% to, say, 10%, which in the long run will reduce the need for new car production. In addition, her Lynk & Co 01 car is a hybrid electric vehicle (EV) – which makes it much more eco-friendly than non-hybrid internal combustion engine (ICE) vehicles.

Electric vehicles are on the rise

Out of the 66.7 million cars sold worldwide during 2021, 6.5 million – around 9.7% – were EVs (including both fully electric and plug-in hybrid passenger cars). That’s an increase of 109% compared with 2020.

Different automotive markets have significantly different EV adoption rates. The world’s largest automotive market by far – almost double the size of the next largest, the US – is mainland China. There, 3.2 million EVs were sold in 2021, accounting for 15% of all the new cars sold. Europe had 2.3 million EV sales: 19% of the total. However, in the US only 535,000 EVs were sold, representing just 4% of new car sales.

With today’s shortages of materials – semiconductors in particular – it’s hard to predict what the adoption curve will look like across different regions in the future. In addition, while EVs will have a positive impact on greenhouse gas emission levels, we need to keep in mind their downside. First, they require rare metals (especially lithium), and second, producing an EV car results in 60–90% more CO₂ emissions than making an ICE car.

Digitalization is leading the way

That said, what would be the optimal solution from a sustainability point of view? The combination of EV cars and higher utilization rates holds great promise since, as we have seen, higher utilization of cars can reduce production-related CO₂ emissions while transitioning to EVs reduces emissions from transportation.

From a holistic perspective, disruptive and innovative digitalization will be the key enabler of this type of transformation, just as it enabled the rise of Airbnb a decade ago. The icing on the digitalization cake is that as autonomous driving gradually becomes a reality, we can increase the utilization percentage even more and take a further step toward an eco-friendlier industry.

Sharing is caring… for the environment

In conclusion, with the help of digitalization and sharing, we can reduce the need for newly produced cars and increase car sharing bookings to get closer to Airbnb’s 356.9 million. This approach could bring about a substantial reduction in the passenger vehicle industry’s 7.1% share of global emissions.

At an individual level, it’s now time for all of us car owners to think about whether we can be like Jenny, and make sure that our next car is not standing still 96% of the time.

AUTHOR

John Sparrefors
Global Account Executive in Automotive Sector