Former, Director of Business Innovation, Daimler AG and co-founding CEO of Car2go
Wilfried Steffen was a Director at Daimler AG from the 2011-15 where he began the Business Innovation team. He was responsible for leading a team to build new mobility businesses to complement the core automotive operation. During this time Steffen was the founding CEO of Car2go which is one of the leading car sharing platforms in Europe. Before this, Steffen was CEO of Merecedes-Benz UK between 2003-11 and had various other CEO and CFO roles across regions and brands within the Daimler AG Group.Read moreView Profile Page
I think a good place to start would be to lay out your experience and the history to the Business Innovation unit within Daimler?
In the late 2000s, Daimler looked into new business ideas and new business models to complement their core business of manufacturing and selling vehicles, from passenger cars to vans, heavy trucks, buses and so on. The board decided to give the authority to a group of younger executives with a budget and basically a white piece of paper. This group embarked on assembling ideas, mainly in things that could compliment the core business. That was the only guideline they had to follow, “Don’t come up with something like medical systems. Keep it somewhere in relation to the core business.” So, the group started looking into megatrends at the time. As you might recall, in 2007/2008 that was the breakthrough of the smartphone, always on and always available. The other megatrend was urbanization. The more we understood about China, the more it became clear that, particularly in Asia, people tend to move into urban centers. We looked into the consequences of growing population in these urban centers, particularly what that means in terms of mobility. Then we had the first trend in sharing, if you remember Airbnb came to the market around that time. There was a headline at the time that said, “Sharing is the new owning.” Another megatrend was a restriction on the availability of fossil fuel resources, climate change, and so on and so forth.
The group then looked into the question, “What does this mean to our business?” Out of the megatrends is there anything that can attack our main core business in manufacturing and selling vehicles? One of the areas that became particularly interesting was urban mobility, that's where this car sharing idea started, so to speak.
Daimler claim to have 3.6 million customers and roughly 15,000 vehicles. Could you define the concept of car sharing?
We have to go back a little bit in history, because the model as we know it today evolved over a period of a couple of years with different pilot projects in various cities. We started in a small environment with not a lot of supporting technology just to understand what the typical utilization and rationale of the customer is. How many customers per vehicle do we need to attract?
It became quite clear that two main things are necessary for some kind of success: that's accessibility, meaning it must be very easy to find and access a vehicle; and the other thing is availability. You need to find a sweet spot where you hopefully have enough vehicles on the road so that you can satisfy the demand that you have generated for this new concept. It became clear through these pilot phases that you need urban conurbations of a minimum 500,000 people, just to get going. You need to have enough vehicles on the road so that you can say that they are ‘usually available’ and on the other hand, for the economics to work, you get enough throughput, you get enough people who have the demand for sharing a vehicle. That's why, if you look into the history, there are a couple of cities where Car2go and I think DriveNow as well, tested and then moved out. Copenhagen because it's a typical bicycle city. Stockholm didn't work. London didn't work. London was for other reasons, because of the difficult legislation in London with 35 boroughs, which all have different rules and regulations. You couldn't make Car2go available in all 35 boroughs, so it didn't make sense because Car2go was a free flow car sharing model, and not a station-based model.
So that means you can use a mobile app or GPS to locate a car and then you use the car for a certain period of time or distance and when you park the car it's within a certain distance of the city?
Correct. You need to define a certain area of operation. So, you want to make sure that you can manage the vehicles. At certain times of the day you have to make sure that you move the vehicles back because, based on the data that you have generated in the past, you know that there are certain peaks in demand in certain parts of your area of operation. The typical thing is that in the morning you want to have as many vehicles as possible in the living quarters of a city. And then people go to work to the city center and you want to make sure that you have an equal distribution. When it comes to the end of the day, you need more vehicles in the city center because people like to use a car to move back.
Is there a manual element to this, in transporting the vehicles and making sure that accessibility or availability is in the right spot at the right time?
There is a manual element to it. You have a certain number of jockeys, as we call them, who move around the city and identify where there is a bundle of vehicles, where the number of vehicles that are parked there exceeds the projected demand at a certain time. It's a labor cost. You have to meet these labor costs to make sure you have a relevant accessible number of vehicles.
How do you look at the limitations in adoption? You mentioned how there needs to be a certain density of population, 500,000 people, so that's one key criteria, plus there needs to be a certain structure of the city in terms of transportation and infrastructure. Does that limit how you can sell the service?
To some extent. Car sharing as we know it is based on the theory, and I think the theory is still valid, that people like individual mobility. They want to move around when they want, not based on a timetable. But I will say that the better the public transport in a given city, the more difficult it is to establish car sharing as an additional form of transportation. In some cities it might be an add-on, because you have significant restrictions on parking or enormous cost when you park a car or you have to use a garage or something like that, where people consider car sharing as a very welcome addition to public transport or bicycle sharing or what have you. I think the mix of mobility offers in a city plays very much to the attractiveness of a city. I think car sharing can do this, can increase the attractiveness of urban centers.
What is the typical use case for car sharing?
I think from a user perspective, it is a very flexible individual form of mobility in addition to other forms of transport within the city. We have tested other forms where we offer car sharing for particular user groups i.e. when you have a company with many campuses around an area, corporate car sharing. We tested it and established it in China, where you make car sharing available to your employees to move around these campuses to go to meetings, or maybe one place doesn't have a cafeteria so people move over. So there are different possible use cases, and the team are still in exploration mode. You could expand the car sharing into light commercial vehicles. Where you have a user group that has mobility demands at different times of the day so you have a pool of vehicles to go and do their business.
So what's the state of B2B, commercial and consumer roughly in terms of market share?
I would say at the moment it's 90/10. So 90% is B2C and 10% is B2B.
Those B2C journeys, are they to work or for leisure? What is the average distance for example?
I hope my knowledge is still valid, but a typical ride is somewhere between 10 and 15 minutes or in kilometers around 10 km. So it’s an urban form of transportation. Although Car2go and ReachNow, as it's called since the merger with DriveNow, offers daily rentals as well, or hourly rentals. But this is just in addition to the base use case of flexible short distance, short time car rental, if you like.
Do you have any idea about the growth in users?
The number of users you mentioned before. Car2go claims that they now have 3.8 million users across all the locations with roughly 13,000 or 15,000 vehicles on the road.