Asia might make a promising market for carsharing. Depending on where you live, cars are either too expensive or rendered useless by traffic congestion. These problems give carsharing intiatives an invitation to come in, which is why iCarsclub wants to be an early player in this space.
The Singapore startup has been working on their solution for months, and after delays with finalizing their motor insurance terms, it finally launched on 12 December.
Collaborative consumption for motor vehicles is not new in the world or even Asia. This year, we’ve seen ridesharing apps enter the market, offering users the ability to split costs on a cab fare or find a carpooler to share a ride to work. Governments are particularly supportive of this concept due to its public benefits: Reducing air pollution and traffic congestion.
In Singapore, carsharing companies like CarClub and Whizzcar own a fleet of vehicles and offer membership plans that gives access to a variety of vehicular types. Customers can make a booking, head to anyone of the stations belonging to the companies, and begin driving.
While iCarsclub shares some similarities with these two companies, its business model is fundamentally different. It shares the DNA of modern web startups, aiming at scalability and growth. Think Airbnb, a peer-to-peer property rental site, but for cars.
We can start understanding iCarsclub by viewing it as a two-sided platform business. In other words, it is a marketplace that brings two groups of customers together who can mutually meet each other’s needs.
It enables car owners to make money by renting out their car when it’s not in use, and also allows commuters to zip around town in a vehicle without the hefty ownership costs. iCarsclub simply provides the platform and infrastructure to bring these people together to transact in a convenient fashion.
So, iCarsClub does not actually own a fleet of vehicles. It does not have to pay for maintenance either, since that is the responsibility of car owners. The only hardware it has to keep in tiptop shape are the keyless entry systems that customers can unlock with a mobile phone prior to getting into the car.
In theory, iCarsclub can lower usage costs since it saves on operating expenses. Indeed, Jamie Wang, founder and CEO of the company, claims that on some makes, its fees are 30%-50% lower than its competitors.
However, it isn’t easy to make a straightforward comparison, because the fee structures are radically different. Weighing a three-hour rental of a manual Suzuki Swift on a Monday morning of both services, I find the costs to be roughly similar. iCarsclub’s fees came up to SGD39, inclusive of prepaid fuel charges, while CarClub’s fees are either SGD26.60 or SGD35.90, depending on which membership plan you have.
While it might seem that CarClub is the winner here, the situation is complicated by the fact that the company charges a one-time fee of SGD100 and a monthly fee of SGD10.70. iCarsclub, on the other hand, is free to join. Its fee structure is much more simpler too, and that’s welcoming. It simply earns revenue by taking a 20% cut of every transaction.
What may give iCarsclub a long-term advantage, however, is its business model, which is far more scalable and potentially more profitable than CarClub’s. While the incumbent is limited by the number of cars it owns in its fleet, iCarsclub can expand more easily simply by getting more car owners on board. They certainly wouldn’t mind earning extra cash for their vehicle’s idle time.
The startup’s challenge would be to earn the trust of customers and mitigate concerns that other users might damage their vehicles. iCarsclub offers motor insurance in case of an accident, but what happens when a renter steals an item or damages, say, the rear view mirror or scratches the car paint accidentally?
Regardless, there’s a decent chance iCarclub can gain early traction in Singapore next year, provided that they execute well. It is introducing a potentially better product into an existing market, so I expect hundreds of users to sign up in months. It might even expand the market due to its ability to entice car owners to come on board and its potentially lower rental costs.
iCarsclub is founded by Jamie Wang, and Eddy Zhang, who were both colleagues at Mozat, a Singapore-based provide of mobile social networking services. Jamie was a systems developer in the company while Eddy was a software research engineer and head of middle-east business. Both left Mozat last year to work on their startup.
While both are quite new to the startup game — Jamie started a business while in NUS selling pillows that addresses his schoolmates’ back pains, while Eddy graduated recently from Founder Institute, having developed his peer-to-peer car rental idea there — the co-founders possess technical expertise that is crucial to the startup’s early phase.
It’ll be interesting to watch if iCarsclub can reach expand successfully beyond Singapore and reach the Growth Stage. The carsharing market in Asia is undeveloped — there are only an estimated 15k members in Asia’s carsharing clubs, less than 20% of Europe and America respectively.
But as I stated earlier, cost of car ownership and traffic congestion, which afflict Beijing and Shanghai — cities that iCarsclub want to expand into eventually — could provide an impetus for commuters to adopt carsharing and governments to support such initiatives.
Mainstream market demand will be another factor to watch out for: As more Asians rise to Middle Class status, car ownership could be seen as a status symbol, as is the case in China right now. Whether or not Asians in developing markets can be convinced to share instead of possess, either for the sake of the environment or its pragmatic cost benefits, remains to be seen.
If iCarsclub is successful, it could create a new niche market for itself in developing economies, consisting of Middle Class strivers who can’t yet afford a car, but want the lifestyle of owning one. Singapore could then act as its base and bulwark for overseas expansion.
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