Over the past two years, there have been rumours that BMW and Daimler could merge their respective car-sharing brands Drive Now and car2go. This has been held up by resistance from Sixt (BMW’s previous partner in Drive Now) and EU antitrust investigations into collusion amongst German firms.
We’ve expected the merger to be announced for a while, particularly since BMW bought out Sixt and became the sole owner of DriveNow earlier this year. The scale of the merger, however, has turned out to be much wider than expected and taken the markets by surprise. The 50:50 joint venture (pending EU regulatory approval) would consolidate their car-sharing, ride-sharing, parking location services and charging services, as well as Daimler’s moovel platform.
Given the history of competition between the two automotive providers (over 100 years), it will be very interesting to see the collaboration evolve. They will still continue to compete in the passenger vehicle space – IP, product design, R&D competence make an OEM-level merger unlikely. In contrast, the service ecosystem has fewer constraints; hence, the merger.
Increasingly, participants in the service space have realized that partnerships are central to success. The joint investment in the mapping service company HERE by BMW, Daimler and Audi was the first step in this direction. Success in the service ecosystem is dependent upon economies of scale – one of the key reasons underpinning the merger.
There are strong synergies driving the merger – economies of scale for one. In the car-sharing market, with profitability the challenging proposition it currently is, combining forces would go a long way in tipping the scales in their favor.
The merger would also place the companies in prime position to take on the competition. With over three million members globally, Daimler’s car2go is one of the largest car-sharing operators today. After the merger with BMW, the joint car-sharing operation will command a share of over 30% in the global car-sharing market. This is bound to raise the stakes and intensify the race for dominance not only in the car-sharing market, but also with adjacent services such as ride hailing. The merger sets the stage for OEMs to take on tech competitors such as the Uber and Didi.
The new entity would also be the perfect platform for both OEMs to promote their connected, electric and autonomous ideology. Increasingly, cities across the world are pushing sustainable policies. Sustainable mobility services, through electric carsharing, zero emission ridehailing and provision of other shared mobility services, are expected to provide OEMs with traction with local city authorities.
Additionally, the runway for commercialisation of autonomous technology is shrinking and new entrants (e.g. Google) from Silicon Valley with deeper pockets and more agile infrastructure are entering the space. These are participants who are adept at responding to the market and, in recent years, have made leaps and bounds in developing autonomous capability with the long-term vision of running autonomous taxi fleets and rendering the need for car ownership redundant. We can expect to see both BMW and Daimler use the joint venture as a platform for their electric vehicles and eventually their autonomous vehicle initiatives.
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