Automakers Embrace Car-Sharing Services

The sharing economy is rapidly spreading to car ownership, leaving the industry no choice but to come up with creative solutions.

Carmakers are venturing into sharing businesses, and car rental firms are launching longer-term sharing options.

Hyundai is the first of Korean car manufacturers to enter the sharing business. Vice chairman Chung Eui-sun said at a recent event, "Young people these days would rather share a car than own it, so we'll move into services as well."

The automaker started two pilot programs at the end of last year with just 50 members for each, and hardly anyone has quit so far. One option is access to a Sonata, Tucson or Veloster for W720,000 per month, and the other is to pay W1.49 million per month to drive a luxury Genesis G70, G80 or G80 Sport (US$1=W1,186).

It would cost about W1.49 million per month to pay off the actual cost of a W70-million G80 on a four-year instalment plan.

Around 80 of the initial members are in their 30s or 40s. "Younger people are less averse to the idea of sharing a car. There are no maintenance costs, so we get a lot of inquiries for leasing options from businesses as well," a Hyundai staffer said.

Kia plans to introduce a similar service in the near future.

Lee Sun-beom, a 44-year-old businessman, is one Hyundai subscriber. "It's good to have flexibility driving a number of different new cars with the highest specification without a big deposit and maintenance costs. You can stop the subscription at any time. I'm staying in the scheme until I find a car that I absolutely want to buy."

BMW also launched a subscription service called All the Time Mini with car sharing start-up Epikar in November last year. It costs a one-off registration fee of W1.8-2 million and monthly fee of W900,000-W1 million. Subscribers can drive any of six cars in the program including the Mini 3-door, Mini 5-door, Clubman and JCW, changing to a different model once a month.

There were 300 members in the scheme as of April. "Many young people want to experience a number of different cars rather than driving one that costs W30-40 million and being stuck with it. It's also useful to be able to test-drive them before committing to buy," a staffer said.

Traditional rental car companies and existing car sharing businesses are moving towards long-term subscription models. Lotte Rental launched a pilot subscription plan on May 13 starting at W490,000 which is divided by category -- compact, mid-sized, large and imported cars -- and users can drive three different cars in the same category for three months.

There is an option to upgrade one category for one month. A Lotte Rental staffer said, "The advantage of our program is that you're not limited to cars from just one company but have access different brands."

Socar launched a new long-term subscription plan on May 22. Members lease a car for 36 months but can rent it out to other members when it is not in use and get a discount on monthly payments.

Used car sellers are joining the trend with second-hand cars that are one to three years old.

The trend is global. In Japan, Toyota started a new subscription service that enables members to drive five different cars for three years for 50,000-100,000 yen per month. Jeep runs a similar program in the U.S. where subscribers can drive a range of different cars for 24 months.

"There is no need to worry about insurance, tax, maintenance costs, depreciation and the hassle that goes into buying and selling a car. These sharing services are economical and pragmatic ways to drive a car," an industry source said.