{"id":20776,"date":"2016-11-18T19:16:08","date_gmt":"2016-11-19T00:16:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/bmw-drive-now-analyze-later\/"},"modified":"2016-11-18T19:16:08","modified_gmt":"2016-11-19T00:16:08","slug":"bmw-drive-now-analyze-later","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/bmw-drive-now-analyze-later\/","title":{"rendered":"BMW – Drive now, analyze later?"},"content":{"rendered":"

BMW is one of largest automotive conglomerates in the world with over 120,000 employees and 2 million cars delivered in 2015. [i]<\/a> Founded more than 100 years ago in Munich, Germany, the automotive giant\u2019s most recent initiative is a service called \u201cDriveNow\u201d.<\/p>\n

DriveNow is a car sharing joint venture between BMW and rental car company Sixt which was started in 2011 in Munich and has since expanded to many major European cities, including London, Copenhagen, and Brussels.[ii]<\/a> Customers can download a mobile app and register for a one-time nominal fee (EUR 29 in Germany at the moment) on the DriveNow platform which will do a quick background check and require credit card information for billing purposes. After registration, the customer is immediately able to use the GPS based technology in order to find rental cars in their vicinity (please see below).<\/p>\n

\"screen-shot-2016-11-18-at-2-47-52-pm\"<\/a><\/p>\n

These can be reserved for up to 30 minutes and (as soon as the customer has unlocked the car with the help of a custom code within the app) cars are billed by the minute with parking, gas, and insurance included[iii]<\/a>. Prices are competitive at ~EUR 0.50 per minute which makes DriveNow very attractive for classic taxi journeys, such as airport transfers, which are regularly overpriced in many European cities[iv]<\/a>.<\/p>\n

 <\/p>\n

DriveNow is a classic example of how digital transformation \u2013 in this case, the powerful processing capabilities of GPS data via cloud infrastructures \u2013 can disrupt established markets, such as the automotive industry. This has not been limited to Europe only, and BMW was not the first mover in this market with competitor Car2Go, a Daimler initiative, launched in 2008[v]<\/a> and ZipCar as the main US competitor. A Deloitte study estimated US membership in car sharing inititives at 1.3 million members in 2014[vi]<\/a>. BMW currently counts roughly 580,000 members on DriveNow [vii]<\/a>, roughly half of which is in its home market in Germany. However, these numbers are expected to grow significantly with future market estimates at 35 million users worldwide by 2021 and annual revenue of ~EUR 5bn[viii]<\/a>, largely driven by urbanization (please see below).[ix]<\/a><\/p>\n

\"screen-shot-2016-11-18-at-3-42-59-pm\"<\/a>
BCG Study, February 2016<\/figcaption><\/figure>\n

However, one should keep in mind that this is expected to go hand in hand with a decrease in overall car sales (BCG estimate in 2016: net revenue loss of EUR 7.4bn to car manufacturers)[x]<\/a> which points at a potential root cause for BMW\u2019s aggressive expansion in the car sharing space. Brand exclusive car sharing is not only a built in insurance policy against general digital market disruption, it can also be deemed a great opportunity for marketing purposes[xi]<\/a>. First of all, BMW is able to reach non-core customers in cities, such as young professionals or students, who might not necessarily have the financial means to afford an expensive car, but might be potential customers in the future[xii]<\/a>. With DriveNow, these new customers can also experience new technologies[xiii]<\/a>, such as hybrid and electro cars. Especially the latter has been used extensively by BMW in Germany where electric cars now constitute for 20% of its total fleet[xiv]<\/a>.<\/p>\n

 <\/p>\n

When evaluating DriveNow\u2019s potential, one has to remember that the competitive landscape in Europe is vastly different from the US. Ridesharing companies, such as Uber, have faced major legal obstacles in Europe. Furthermore, strict data security laws are restricting companies from collecting and analyzing customer data, in this case speed, outside temperatures, etc. which could be useful for insurance companies in evaluating traffic accidents. One step in this direction is the ongoing cooperation with insurance company Allianz in the UK[xv]<\/a> with a focus on telematics. Their most recent collaboration with Silicon Valley based Nauto explores AI technologies in order to analyze driving behavior, including texting or drunk driving.[xvi]<\/a><\/p>\n

 <\/p>\n

DriveNow recently turned profitable[xvii]<\/a> and entered the US market under the name ReachNow in April 2016[xviii]<\/a>. However, it remains to be seen whether BMW will be able to turn digitization into an ultimate success story. In my opinion, digitization will lead to increasing consolidation pressure as new car sales shrink. Therefore, BMW will need to scale DriveNow quickly and find innovative ways to monetize its access to data in order to compensate for this revenue gap in the future.<\/p>\n

 <\/p>\n

Word count: 800 words<\/p>\n

 <\/p>\n

[i]<\/a> See https:\/\/www.bmwgroup.com\/en\/company.html<\/a>, accessed November 18, 2016<\/p>\n

[ii]<\/a> See https:\/\/de.drive-now.com\/en\/#!\/carsharing\/international<\/a>, accessed November 18, 2016<\/p>\n

[iii]<\/a> See http:\/\/www.bmw-welt.com\/de\/visitor_information\/drive_now.html<\/a>, accessed November 18, 2016; and https:\/\/www.bmwgroup.com\/de\/marken\/drivenow.html<\/a>, accessed November 18, 2016<\/p>\n

[iv]<\/a> See Boston Consulting Group Study: Bert et al (2016), \u201cWhat\u2019s Ahead for Car Sharing?\u201d, p. 5, http:\/\/www.bcg.de\/documents\/file206078.pdf<\/a>,: Study estimates price savings of an average car sharing trip in Berlin at roughly EUR 14 compared to a taxi.<\/p>\n

[v]<\/a> See https:\/\/cleantechnica.com\/2016\/02\/23\/bmws-i3-carsharing-program-drivenow-arrives-in-seattle\/<\/a>, accessed on November 18, 2016<\/p>\n

[vi]<\/a> See https:\/\/dupress.deloitte.com\/dup-us-en\/industry\/public-sector\/smart-mobility-trends-carsharing-market.html<\/a><\/p>\n

[vii]<\/a> See Annual Report 2015, page 42, https:\/\/www.bmwgroup.com\/content\/dam\/bmw-group-websites\/bmwgroup_com\/ir\/downloads\/en\/2016\/Annual_Report_2015.pdf<\/a>, accessed November 18, 2016<\/p>\n

[viii]<\/a> See Boston Consulting Group Study: Bert et al (2016), \u201cWhat\u2019s Ahead for Car Sharing?\u201d, p. 2, http:\/\/www.bcg.de\/documents\/file206078.pdf<\/a>, accessed on November 18, 2016<\/p>\n

[ix]<\/a> See Boston Consulting Group Study: Bert et al (2016), \u201cWhat\u2019s Ahead for Car Sharing?\u201d, p. 10, http:\/\/www.bcg.de\/documents\/file206078.pdf<\/a>, accessed on November 18, 2016<\/p>\n

[x]<\/a> Ibid.<\/p>\n

[xi]<\/a> See Porter and Heppelmann (2014), \u201cHow Smart, Connected Products are Transforming Competition\u201d, HBR, February 2014, p. 15<\/p>\n

[xii]<\/a> See Boston Consulting Group Study: Bert et al (2016), \u201cWhat\u2019s Ahead for Car Sharing?\u201d, p. 3, http:\/\/www.bcg.de\/documents\/file206078.pdf<\/a>, accessed on November 18, 2016<\/p>\n

[xiii]<\/a> See Zoepf and Keith (2015), \u201cUser Decision-Marking and Technology Choices in the U.S. Carsharing Market\u201d, http:\/\/web.mit.edu\/sloan-auto-lab\/research\/beforeh2\/files\/Zoepf%20and%20Keith%20Transportation%20Policy%20for%20Review.pdf<\/a>, accessed on November 18, 2016<\/p>\n

[xiv]<\/a> See Annual Report 2015, p. 42, https:\/\/www.bmwgroup.com\/content\/dam\/bmw-group-websites\/bmwgroup_com\/ir\/downloads\/en\/2016\/Annual_Report_2015.pdf<\/a>, accessed November 18, 2016<\/p>\n

[xv]<\/a> See https:\/\/www.towerswatson.com\/en-GB\/Insights\/Newsletters\/Global\/emphasis\/2014\/the-internet-of-things-is-transforming-the-insurance-industry<\/a>, accessed November 18, 2016<\/p>\n

[xvi]<\/a> See http:\/\/fortune.com\/2016\/10\/07\/bmw-toyota-nauto\/<\/a>, accessed November 18, 2016<\/p>\n

[xvii]<\/a> See http:\/\/www.autonews.com\/article\/20161003\/GLOBAL\/310039970\/bmws-drivenow-is-profitable-now<\/a>, accessed November 18, 2016<\/p>\n

[xviii]<\/a> See http:\/\/reachnow.com<\/a>, accessed November 18, 2016<\/p>\n","protected":false},"excerpt":{"rendered":"

Car sharing is disrupting the automotive industry. BMW has established car sharing company DriveNow in 2011 which quickly gained substantial market share in Europe and is expanding to the US now. 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