Car2go Can Make A Dent on Uber – Strategy with RS

Look who is trying to disrupt Uber?

Car2go, a subsidiary of Daimler AG is attempting this seemingly difficult task. It is a car sharing services introduced in European and North American cities. It distributes vehicle, across cities where it operates. You can take any of these cars you find distributed across your city to your destination. At your destination you can either leave the vehicle, or go back to it if you want to drive further. Its business model involves one time sign up fee of $ 35 + tax. Thereafter, there are no monthly fees or rental subscription packages. Like Uber, it is a blue blooded product spawned by the rise of On demand economy whose products have the following advantages:

1. Available on tap: You can get Car2go at a moments notice. No reservations is required. But if you wish to reserve it it can be booked 30min in advance
2. Pay only for what you use.
3. Squeezes out wastage: It is a one-way model. This means there is no need to waste the time you’re paying for by returning the car to the same location that you began your trip. You can leave the car inside the home area in an approved parking space.
4. Service is expandable & collapsible: You can use it as long as you like or as less as you like. It will configure itself to meet your requirements.
5. Sweat your asset: It helps you sweat your assets. Now you do not need to own a car. The money thus released can be deployed for more productive purpose.

Like any disrupter it has identified the pain points of Uber user & is attempting to either reduce or eliminate them. What are the pain points of Uber users?

*Safety – remember the despicable Delhi incident?
*Surge pricing– If the demand for Uber increase then price is likely to increase. For example, if heavy rain lashed Mumbai & the demand for Uber rose then the price will rise to cash in on the sudden increase in demand. This raises ethical & moral questions about the business model pursued by Uber.
*Pricing: Uber has priced itself at the upper end.
* Size of vehicle: Fleet has ‘large’ size vehicles which may be difficult to navigate in congested metro roads.
*Energy efficient vehicles? Uber has not focused on putting state of art energy efficient vechile because it is not the owner of these vehicles … it is merely an aggregator.

Car2go addresses these pain points robustly.
1. Safety: In Car2go you are the driver & hence safety issue does not get to raise its ugly head.
2. Pricing does not surge with demand. It stays consistent. Users pay $.41 per minute plus tax. Thereafter there are no other hidden cost like deposits, parking charges, fuel costs, or recurring annual fees.
3. Pricing is extremely competitive.
4. Compact cars: Car2go has chosen to put compact cars on the road cars which are ideal for city driving & hence there are less chances of you getting stuck in the city traffic. Also it is easier to find a parking place for compact cars!
5. Energy efficient cars: These compact cars are also highly energy-efficient which means they’re good for the environment.

Business lessons for us: No matter how big or valuable a company or brand may be but you always have a chance to disrupt or destroy it. For that you should identify the current pain points of users. And then conceptualize a product / business model which ensure that these pain points are either reduced or eliminated. And do not stop there. Go ahead & add a few additional benefits. Human being wish to minimise their pain points & when that opportunity presents itself then they will, on their own volition, shift there franchise to brand / business which promises it & more importantly delivers on its promise.

Remember the Goliath of your industry can be beaten by you Mr. David by pursuing this strategy.

—-

rajesh-srivastava-insideiim

In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here

Comments

2 comments

Rajesh Srivastava

Indeed Mohit the strategy can be a game changer in India. But I am not sure if existing players like OLA can adapt it & make a success of it. If OLA has to adopt it then it has to have a ‘white space’ company’ with in it to execute this business idea.