4 Reasons GM is Investing in Car-Sharing

Corporate America is joining the access economy. You can already see signs of this trend with companies like Hertz, BMW, Ford and GM partnering with collaborative consumption companies, or even start a sharing service of their own.  BMW, as we learned at SXSW has partnered with ParkAtMyHouse.com, Ford partners with Zipcar, Hertz started its own car sharing service – Hertz on Demand, and GM has invested in RelayRides. It’s interesting to see the growing level of interest of large corporations in the sharing space, which sometimes seems to be at odds with the economic model their sales are based on. Take for example the case of GM.

Unlike BMW, Ford or Hertz, GM invested in a company that connects people who need a car with vehicle owners. In other words, RelayRides creates a peer-to-peer market that maximizes the utilization of existing cars, hence reducing the need to add more cars. Now, not only did GM invest an undisclosed amount in RelayRides, but its OnStar division is also working with RelayRides to make the matching between owners and lenders easier. The concept, according to RelayRides, is that any GM car owner who lists his car on the RelayRides marketplace can link his OnStar and RelayRides accounts. This allows a borrower to reserve and unlock a GM car with nothing more than a mobile phone.

In all, it looks like GM is playing an important role in the growth of RelayRides, which announced earlier this month that it is expanding its service nationwide. And the question that comes to mind is why would GM do this? Did the company forget it makes money from selling more cars, not less?

Here are four possible explanations:

 1. Marketing, marketing, marketing!

Why 3 times marketing? Because the partnership with RelayRides is a marketing tool to reach 3 different audiences, especially now that OnStar is getting into the picture.

First, you’ll probably see more GM owners offering their cars through RelayRides, especially as RelayRides, according to Forbes, plans to advertise its services to the 6 million GM car owners who subscribe to GM’s OnStar. This is a great way to remind current GM car owners of yet another advantage of being a GM car owner – the potential to make some extra cash from your car easily and safely with OnStar.

Second, since more GM owners will join the program, RelayRides’ lenders will probably use cars made by GM more frequently than other cars. Basically, it means they’re getting a test drive in GM’s new models, getting to try both the cars and the OnStar system. As Shelby Clark, founder and Chief Community Officer at RelayRides put it: “Consumers tend to buy cars they are familiar with, so if GM can get consumers driving and loving GM cars, they will be more likely to buy a GM car if and when they do purchase a car.”

Third, it can be a way to reach other potential customers, not necessarily customers of RelayRides, but folks who hear the media stories about RelayRides, or learn about it from a neighbor who rents cars through the service. I, for example, heard about OnStar for the first time only when I read about RelayRides. It doesn’t mean I’ll buy a GM model, but at least I’m aware now of a benefit GM cars provide I wasn’t aware of before.

2. The cool factor

The Volt hasn’t become a status symbol yet , so GM is certainly looking for other things that will help improve its image. Tapping into the access economy could give the company a much-needed boost. After all, is there anything trendier or cooler right now more than the sharing space?  When GM is taking a leading role in RelayRides, it definitely helps to boost its image with age groups like the Millennials that are very enthusiastic about the access economy. Just think about SXSW – although GM was a major sponsor of the conference, their RelayRides association added much needed cachet.

3. Good investment

There’s a good chance RelayRides will become a good investment. The car sharing industry is expanding rapidly, exhibiting 44% annual growt.  A 2010 study by Frost and Sullivan projects that car-sharing revenue in North America alone will exceed $3B annually by 2016, serving 4.4M members. As Forbes mentions, car sharing is a highly capital intensive business in which fleet costs constitute the biggest expense. A company like RelayRides has no fleet and therefore a substantial competitive advantage in this market. Don’t be surprised if GM will help RelayRides to leverage this advantage, leading the company eventually to IPO, just like Zipcar, which enjoyed a successful IPO last year.

4. Joining the revolution

If you can’t beat them, join them. GM's head of business development initiatives, Bob Tiderington, was very clear about adopting this motto: “We could stand on the sidelines and watch or we could choose to participate and try to make it into a favorable business model, which in this particular case, we have.”RelayRides’ founder Clark added: “One could argue that carsharing is disrupting GM's core business, and instead of fighting the disruption, GM is participating in the disruption, and helping to shape the conversation in a way that will ultimately help its business.” If this revolution will succeed, it will certainly benefit those who were part of its avant-garde. Even GM.

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.