The cost of cars

While Covid-19 made 2020 an extraordinary year, offices are bound to open their doors sometime and as millions will commute to back work, traffic jams are going to see a comeback. In a small country like the Netherlands, drivers in The Hague and Utrecht lost more than 90 hours in traffic in 2018, comparing to around 80 hours in Eindhoven & Rotterdam and 69 hours in Amsterdam.

Apart from being stuck in traffic, cars stick to parking spots for 90% of the day. Yet around 50% of public spaces in cities are reserved for driving or parking cars. Passenger cars also occupy the largest space on the road relative to the number of passengers they transport. Luckily, the Dutch car sharing market is stepping up to solve this efficiency problem.

A look to the future

Of the 9 million passenger cars in the Netherlands, 30% of the distance travelled, some 33 billion kilometres, is work-related. Adding freight transport to this number, business-related transport accounted for 48% of total distance travelled on Dutch roads in 2018.

The Planbureau voor de Leefomgeving (PBL) and the Centraal Planbureau (CPB) expect that between 2014 and 2030, passenger car traffic will yet again increase by 23%. This compares to a predicted increase of 33% for trains and 6% for bicycles.

The PBL and CPB estimate the preliminary effect of car sharing on traffic reduction to be moderate. Yet their estimations omit the business car sharing market as well as the effects of the Dutch climate agreement (Klimaatakkoord), signed in 2019. In this agreement, the government committed to:

• Reduce 8 billion business car kilometres by 2030,
• Provide 100,000 shared electric cars for 700,000 users in 2021, and
• Introduce emission-free zones in 30 to 45 larger municipalities by 2025

The bottom line is that employers need to reduce the transport by cars associated to their business and use the remaining cars more efficiently.

Benefits of car sharing

Given the significance of work-related travel on Dutch roads, the B2B market offers a clear case to reduce congestion on the roads and yield benefits for businesses. At current, the administration of company cars generally still requires employees to manually register the destination and mileage driven, which then needs to be digitised for tax purposes. Car sharing software automatically collects usage data and produces simple invoices.

Direct cost savings is a no-brainer since using fewer cars more efficiently equals savings. WeGo, a provider of car sharing software for companies that own their own car fleet, claims that companies can achieve direct costs savings of up to 20% with their software.

Reducing car travel also decreases a company’s carbon footprint, addressing greenhouse gas emissions in Scopes 1 and 3. This directly contributes to improving the company’s ESG performance, improving the company’s reputation in the eyes of investors, customers and young talent alike.

Moving to a circular supply chain

Car sharing is an example of circularity – rethinking current approaches to using cars more efficiently. Moreover, the initiative shift to alternative ownership models presents opportunities to realize much larger circular economy gains. The automotive industry still requires vast amounts of virgin raw materials in production. The challenge is to apply develop a circular end-of-life supply chain, keeping raw materials in the product cycle for as long as possible. Through reuse, repair, refurbishing, remanufacturing, repurposing and recycling the useful life of components can be prolonged.

A great example and pioneer in the industry is Renault Trucks, which was acquired by the Volvo Group back in 2001. By building on best practices, the Volvo Group derived almost € 1 billion – or 3% of the group’s net sales – from remanufactured components in 2017.

A question of ownership

Mobility operators use different car ownership models. Ownership can remain with the client company or the operator, leasing company, distributer or manufacturer. The cars are effectively leased to companies with additional sharing software and hardware. As car ownership recedes further from the end-user and closer to the manufacturer, the possibilities to engage in a circular end-of-life supply chain become more realistic. For this to happen however, the link between the intermediaries needs to become stronger.

An innovative example of this is Juuve, a car sharing operator that started out in the consumer market. Recently it has partnered with housing project developers, energy companies and manufacturers to provide shared cars to housing projects and companies. When the cars are not in use – company cars in the weekend for example – they can be shared with the public network and thereby generate revenue for the car owner.

The end goal would see manufacturers retain car ownership, providing their product as a service to companies, through car sharing operators. The operator provides the necessary sharing software and hardware and collect usage data for companies’ administrative purposes and for manufacturers to identify the right moment for repairs.

By specializing in their respective areas of expertise, synergies of collaboration can be achieved that would otherwise not be possible. The first step however to decreasing the resource-intensity of the automotive industry is getting businesses onto car sharing platforms. Because who would want to drive cars, only to be stuck in traffic anyways?

Are you ready to improve your circular economy performance?

If you are looking for innovative ways to reduce your raw material use, identify new revenue streams and develop new value propositions, get in touch with Johana Schlotter at johana@finchandbeak.com or +31 6 28 02 18 80 and leverage business opportunities from the circular economy relevant to you.

^{Image credit: Wikimedia Commons}