Car sharing: The reform that is waiting to take off in Sweden

In Sweden, the sharing and circular economy is all the rage, with car sharing often seen as the pinnacle. At the same time, two international car sharing companies have recently folded in Sweden. We look at a reform waiting to happen.

Early this year, the 2030-secretariat could show that car sharing has passed a milestone. More than one percent of Sweden’s adult population is now a car sharing member. At the same time, traditional car rental companies are transforming themselves to becoming mobility service providers; all important contributions to reduce the total number of vehicles.

The 2030-partner Move About with 100% electric cars in their fleet is growing rapidly, including the world’s first Tesla car pool, and 2030-partner Europcar is using Sweden as a testing ground for new sustainable innovations such as sub-renting; If a car is rented for the week and the customer doesn’t need it on Tuesday, he or she can take part in a sub-rental
scheme and thus reduce the cost of rental. Even the symbol of Sweden, Volvo, is launching a business model where customers choose to what level they want to have the exclusive right to their car versus share it with others.

This development has not been a one-way street; DriveNow, one of the world’s largest car sharing companies, is leaving Sweden, following the competitor Car2Go. Both of them are expanding rapidly in other countries. What went wrong – and what can other countries, cities, companies and consumers learn from it?

Firstly, a change needs to be stimulated. In Sweden, public transport pays 6 per cent VAT. This includes renting a limousine, hiring a helicopter, taking a cab… even using a ski lift – but not sharing a car. Here, the 25% VAT rate applies, giving an uphill battle in making an economic case for itself.

In many large cities around the world, car sharing is exempt from congestion charges since congestion on the roads is reduced when cars are shared – cars spend an average of 96% unused, taking up valuable and scarce space. In Sweden, they pay the same congestion charges as everyone else. In Copenhagen, DriveNow got a large rebate on parking fees in exchange for using only electric vehicles – in Stockholm, no rebate was given and thus no conditions could be set.

Secondly, car sharing needs space. While several car sharing companies use a floating system, allowing the user to collect and leave the car at any legal parking place, the main model is using fixed spaces. Thus, the shared vehicles will be easy to find, and may always have the most attractive parking spaces. Since users are to give up on using the vehicle they
might have had in their own garage, this convenience and predictability is of great importance. In Sweden, municipalities are not allowed to reserve road space for car sharing or any other types of vehicle they want to support for environmental reasons; the case was lost at the highest juridical level. Car sharing vehicles are not allowed to use the high occupancy lane or the lane for public transport either, as they are in the US.

Thirdly, the framing needs to be right. In Sweden, car sharing companies started out playing the green card. Join a car pool (as Swedes call it) and help save the planet. This was only moderately successful; there is only a limited number of persons ready to sacrifice the life they lead for a greener planet and many of them did not have their own car in the first place.
Now, car sharing companies use slogans like “Car only when you want it”, emphasizing the freedom associated with not owning a car, and thus not needing to service, repair, wash or even refuel – that is all taken care of when sharing or renting a car.

Pool boom ahead. With seven out of Sweden’s eight parties in parliament being actively behind the climate target of an impressive 70 % Co2 emissions reduction from the transport sector between 2010 and 2030, increased car sharing in many forms is clearly needed. No matter who wins the elections in September, the 2030-secretariat predicts several policy
changes to kick-start the shared economy and particularly car sharing.

Mattias Goldmann
CEO of Green and Liberal Think Tank Fores