Name: to Turo. Simultaneously, Turo announced they would

Name: Seungyun
Lee                                                           
Date: 28 – 01 – 2018                                                                                      
                 Student Number:
11640227

THE IMPACT OF NEW
TREND, CAR SHARING

 

Introduction

 

The concept of sharing economy has long been in
human history. Before the
development of technology, farmers with different harvest periods shared their
labour force with each other to maximize productivity. The
sharing economy was limited to small society until the technological advance.
However, in this era, the sharing economy is worldwide; the concept of the
sharing economy is actively used for many industries, ranged from car sharing,
labour sharing, knowledge sharing, and tool sharing etc. This change has become
as real, due to the innovation, ‘Digital platforms’.

As
the digital platforms and the sharing economy grow up faster than expected,
there are several drawbacks because the government regulations have not been
arranged for the digital platforms and the sharing economy yet. Here is the one
example of the digital platforms, Turo (Turo.com). Turo is one of leading
company in the car sharing sector of the sharing economy. In 2017, Turo
reported that their service is now provided in more than 4500 cities with more
than 6 million users. In the same year, the parents company of Mercedes Benz,
Daimler AG invested $92 million to Turo.
Simultaneously, Turo announced they would launch its services in Germany in
2018. Turo acquired Daimler AG’s car sharing platform in Germany called
Croove, as the first step to expanding its business to Germany. Croove was
rebranded to Turo (“Daimler hedges on car-sharing future with Turo investment,” 2017).
In 2018, Turo has started service in Germany. With regard to the rapid
extension of Turo, many new issues of safety are concerned. To what extent is
government intervention needed for Turo users’ safety? 

This
paper is structured as follows. In the general background part, the basic term
of the sharing economy and the business model of Turo are explained, and in the
discussion part, current and relevant articles related to the central question
will be discussed. In the hypothesis, validities of the hypothesis will be
explained. Finally, in the conclusion, there will be a brief summary of the
essay.

General
background

 

“Also known as ‘collaborative consumption,’ the ‘peer-to-peer
economy,’ or ‘peer-to-peer consumption,’ a broad range of commentators suggest
that the sharing economy is transforming the way people consume and supply
goods and services, such as transportation, accommodations, and task help” (Oei
& Ring, 2015). The sharing economy basically has the concept of sharing
durable assets, services, food and even knowledge and labour those are already
produced or idle. The concept of ‘Sharing economy’ was first suggested in the early 2000s,
it emerged as a new solution and a business model due to increasing number of
problems related to growing world population and scarcity of limited resources,
and the word ‘Sharing economy’ was first used in 2008 by Professor Lawrence
Lessig, the professor of Harvard. Since then, businesses with the digital
platforms related to the sharing economy have shown rapid growth during a
decade. Research on the digital platforms will inevitably have to investigate
the ecosystem surrounding the digital platform. Ecosystems around the digital
platform need a deeper academic understanding of the platform, about its
structure, dynamics, and strategies/actions. Prior studies have shown that
increasingly complex and interconnected business environments have made
ecotourism particularly important to decision makers. Enterprises are no longer
isolated, and values are jointly created and shared by many contributing
organizations. New theories and models are needed to capture, describe, and
predict the nature of potential destructive the digital platforms (de Reuver,
Sørensen
&
Basole).

Due
to the characteristic of the digital platforms, there are several drawbacks of the
sharing economy. A common criticism is that the extension of the digital
platform disrupts traditional industries those are already actively used. This
is because those platforms such as Turo, Airbnb and Uber involve regulatory
uncertainty. This is due to the fact that existing rental companies are
normally regulated by the law of their countries or states, but the rental
services offered by individuals via those digital platforms may not follow the
regulation in that industry and exploit loopholes to avoid these regulations
and taxes (Malhotra & Van Alstyne, 2014). Another negative aspect can be
that people already have sharable asset earn extra income (not from their
original job) easily.

In spite of these negative effects,
however, the growing digital platform has brought important benefits as well.
One obvious advantage of the sharing economy in the economic term is that
wasteful resources are remarkably reduced because this new type of businesses
does not require producing new cars and building new hotels. Furthermore, it is
evident that choices of consumer have increased in number due to the wide range
of price

Turo
is also one of the companies that have benefited from rapid growth due to its
low-cost competitiveness and strategy. Turo was originally founded under the
name ‘RelayRides’ in 2009, San Francisco by Shelby Clark and his classmates
from Harvard University. The peer-to-peer car sharing often refers to Airbnb
for cars, and it is just because the car sharing concept was inspired by
similar sharing economy business, Airbnb and eBay. The core activity of Turo is
matching demand (renter) and supply (car owner) together and satisfies both the
renter and the car owner. The main of Turo is convenient car renting from
neighbours and make the profit from your idle vehicle. Users can sign up for
Turo with Facebook, Google, or
her/his email. Then, Turo confirms identity and eligibility to become a member.
The car owner lists a car on the website and the renter finds a car which is
suitable him. After the booking of the car and the confirmation of the owner,
the renter meets up the owner at a pickup point, after driving, they meet up
again at the return point. Turo also provides insurance for cars, and that
covers up to $1,000,000 for each trip. The company is based in the United
States, Canada and in the United Kingdom.

Turo’s
growth can be defined as successful because its success benefited not only the
business but also millions of users. Turo claims that car owners (host) have
average earnings of $720 per month, and renter (traveller) also get the benefit
of the average of 35% less than traditional rental agency price on average.
Additionally, for car owners who list more than 3 cars have the average of
$3,000 earnings per month. Moreover, Turo’s contribution to the sharing economy
cannot be ignored as the number of users increased to 5 million just in 9
years.                                                                                            

 

Discussion

 

First of all, it has been a common issue that the
car sharing platforms are taking unfair advantages of their business structure.
While the traditional car rental agencies have ownership on cars, Turo has no
ownership on cars they provide on service. For that reason, Turo avoids
managing associated cost and is excluded from the car ownership tax, and,
moreover, Turo does not do a regular maintenance. There is a point of view that
the digital platforms make an ‘unfair’ advantage that you can charge at an
affordable price. However, this cannot be discussed as it is still a
controversy (Malhotra & Van Alstyne, 2014).

Are Turo users reliable? Turo
claims that they monitor users for the safety purpose. Their backgrounds are
checked and Turo does not accept any actions that against Turo’s regulation.
Chances are never given, and people who did not follow the rule are kicked out
immediately.

Another concern can be that Turo
may violate the regulation of safety and disrupts traditional vehicle rental
industry. It is due to the fact that rental agencies do regular maintenance and
repairing to qualify the business whereas car owners on Turo are not obliged to
do regular maintenance and also Turo does not pay anything for maintenance as
they have no ownership for cars. Law
in most states in the United States of America holds that car rental agencies
are liable for their cars in case of accidents, injuries and wrongful deaths of
renters while they drive. Therefore, car rental agencies need not only the
insurance on their business, even if a driver is insured, but also do a regular
maintenance to avoid the undesired situations. As
a result, maintenance cost occurs to traditional rental agencies for every car
they have arranged for the service while Turo has zero maintenance cost
regardless of the number of cars they provide.

In related to cheaper service cost,
is Turo really unsafe to use? Turo uses self-regulation that can improve the
quality of sharing cars and safety by restricting old cars. It is written on
the regulation of Turo that cars which were made before 2005, driven for more
than 130,000 miles cannot be listed. However, some people argue that there
should be a stronger policy for the safety. Should the governments make a
regulation for the safety of the users of the car sharing platforms? Before the
answer, it has to be indicated whether car inspection and maintenance can
reduce and prevent car accidents. “Recorded defects are a small percentage
of alleged accident causes. Inspection eliminates only a small proportion of
defects (if any). Hence periodic motor vehicle inspection cannot possibly be a
cost-effective safety program” (White, 1987). White has explained it has
long been a very controversial topic if periodic motor vehicle inspection
(PMVI) effective or not. However, he argues that there are few statistical
studies that have provided definitive evidence that PMVI has succeeded in avoiding
accidents. He criticises that inspection programs (which were used in the
statistical studies) for motor vehicles are still expensive. The drivers will
have to spend time and money to drive his vehicle to the inspecting authority.
The repairs he has to make are costly. Even if we assume that governments
operate the services, the government has to pay for costly services, with money
may be raised from the drivers.

With his argument, he has proven
this issue with the experiment and his analysis. The main idea of this research
was to prove a relationship between the car accidents and vehicle inspection.
Then he proved it is indeed difficult to show that periodic motor vehicle
inspection is effective, either because it is ineffective or because its benefits
are not large enough to detect. To evaluate the effectiveness of PMVI, an
enormously large sample size is required. And he finally concludes that
“If PMVI does prevent a measurable number of accidents then it would be of
interest to determine the optimal time between inspections. This would
presumably be done in terms of a balance between accident costs and economic
savings. It would involve relating the effect on accident probability of
remedying various kinds of defects to the size of the inter-inspection
interval”. It is inescapable fact that the car inspection is no longer
effective and should be discontinued (Crain, 1980).

On the other hand, beneficial
effects of the car sharing are observed by researchers, and several advantages
of the car sharing with respect to the environment are reported. What are the
advantages of the car sharing? How big are the effects? “To answer the question
about the impact of the car sharing on mobility and the environment, we thus
compared situations before and the after the car sharing as well as a
hypothetical counterfactual. The resulting difference, ideally, would be that
impact” (Nijland, Van Meerkerk & Hoen, 2015).
In the research Nijland, Van Meerkerk and Hoen used the method of
‘Well-to-wheel’ (WTW), which also includes train kilometre and the emissions
generated to produce fuel (both for petrol and electricity). They also take
into account the changing of ownership by using ‘Life-cycle analysis’ (LCA)
method. Demolition and construction of various transports are considered in LCA
method. The research included 363 participants use the car sharing service.

Overall, the result was positive.
The use of car fell from 9,100 kilometres to 7,500 kilometres. “Of the 7,500
kilometres, 1,500 were driven by shared car. Before, these kilometres by shared
car were either not made at all or other modes of transport were used” (Nijland,
Van Meerkerk & Hoen, 2015). Ownership of cars
per household declined from an average 0.85 to 0.72. Furthermore, respondents
who already own one car gave the answer that they would have bought one more
car if they had not used the car sharing. Besides, if they compute the
‘invisible’ impact, the difference is more pronounced from 10.8 cars per
household to 0.72.

The car sharing was far effective
to reduce CO2 emission. The CO2 emission per car was decreased by 250
kilograms, but public transport and car sharers cause an additional increase of
160 kilograms (Because they used public transport or shared car instead of
their own car.) of CO2 per car. However, because vehicle ownership and disposal
require resources and energy, car ownership also includes CO2 emissions. Given
this fact, the decline in car ownership further reduces CO2 emissions by 85-175
kilograms per household per year, and, therefore, CO2 emission per car was
reduced by the amount of 175 to 265 and this is the same as approximately 8% to
13% of reduction per car.

 

Hypothesis

 

There is no denying the
fact that Turo has more possibility of accidents than the traditional car
rental agencies by few more percent. Although that periodic motor vehicle
inspection cannot prevent car accidents by a large percent, governments should
not overlook risks even if those are small. However, as research has shown that
periodic motor vehicle inspection is costly, and not as effective as costs that
might be spent, this issue should not be the priority issue for government.

The
car sharing has brought positive effects that related to the reduction of gas
emissions. However, vehicle inspection had no large impact on safety and
prevention of accidents, and the inspection process was costly. In the current
situation, it seems that government intervention is not yet needed for the car
sharing platform because their self-regulation work successfully and there is
no significant problem concerning to safety issue, but beneficial effects from
the reduction of gas emission.

 

Conclusion

 

To sum up, there was a
great extension of the sharing economy over the world. People are used to the
concept of the sharing economy. And the thing made the sharing economy to
worldwide is the digital platform. Due to the increase in the digital platform
service, the platforms have grown rapidly in during last ten year and it is now
the essential part of human life. One of huge platform ‘Turo’ is also the case
that has grown successfully in few years. As business extends its size, many
issues have been come out; one major issue was the safety issue. However, the
research has shown that the impact of the vehicle inspection on car accident
was negligible and the car sharing has brought beneficial effects rather than
detrimental effects on the world. It can be said that it is too early for
governments to intervene, it would be better to evaluate and monitor in the
long run.

 

 

Reference

 

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de
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