For the past century, owning a car has become a hallmark of the middle class and buying one has been something akin to a rite of passage into adulthood. However, a new market for car sharing services may be upending this traditional model and creating a world where owning a vehicle isn’t as important (or valuable) to many people as access to a vehicle.
By the end of 2014, there were 1.3 million Americans who could count themselves as members of a car sharing service, an increase of about 34 percent over the previous year’s totals according to statistics collected by the University of California, Berkeley’s Transportation Sustainability Research Center. This increased membership in car sharing programs comes even as American auto sales have increased in strength, especially for trucks and SUVs. Households participating in car sharing programs without owning a car can save more than $400 per month by some measures. Statistics culled from the UC Berkeley transportation sustainability center also found that one vehicle in a car sharing program can replace up to 13 privately owned vehicles, which could become a boon in urban areas where traffic congestion is a problem.
Most of the big names in the mobility industry have been tech-based startups that own no cars but facilitate rides, like Uber or Lyft. These companies, however, offer ride sharing services and don’t reflect the true nature of what a car sharing service offers. There are also car rental companies like Zipcar which now offer a subscription car sharing service for those who need a vehicle regularly. A major name from the auto industry, however, is getting into the ring with its own version of car sharing which it hopes will also continue to promote the idea of private vehicle ownership.
The Ford Motor Company (NYSE:F) has initiated its own car sharing program which is being rolled out on a limited basis in six American cities: Berkeley, CA; Oakland; San Francisco; Portland, OR; Chicago; and Washington, DC. The Ford scheme allows the owner of a Ford car who is financing the car through the company to earn money by renting those vehicles out to other people. The pilot program is being tested on some 14,000 Americans as well as 12,000 Londoners who own Fords.
The Peer-2-Peer Car Sharing program is being run through Ford Credit and in partnership with Getaround, a car sharing program already operating in DC, San Francisco and Portland, OR. Ford representatives cite research indicating that the millennial generation is growing more comfortable with sharing their possessions, especially if the economics of the situation work out in the favor of the car’s owner.
There have been some questions as to whether or not this will prove to be the case, however. In the past, Getaround has promised its users who are renting their vehicles at least $1,000 over the course of three months, but it collects 40 percent of what an owner charges for a rental. Mileage can also eat into a car owner’s profits when maintenance is taken into account. A scenario hypothesized by Bloomberg Business argued that a 2014 Honda Accord, rented at $8 per hour, would begin to cost the car owner money if it was driven more than 105 miles within a three hour long reservation. If the vehicle is only driven 20 miles during that reservation window, the owner would stand to pocket $11.65 from the driver.
Still, the sharing economy is becoming a stronger force in the automotive world and some research indicates that cars are second only to books in terms of possessions which people under 30 are willing to lend. Auto manufacturers are also seeing the utility and potential profitability of embracing sharing programs which ostensibly could hurt sales of new vehicles. Part of Ford’s rationale for Peer-2-Peer Car Sharing is that exposing those consumers who don’t own a vehicle to Ford’s products may make them more likely to purchase a Ford if they do purchase a private vehicle in the future.
This push towards a new model of transportation business highlights in part a need to maintain a strong patent system here in the United States. With effective patent protections, a large player like Ford cannot simply wade into an innovative and profitable market and take over from smaller players like Getaround. The San Francisco-based company has been waiting for more than four years to earn final approval from the U.S. Patent and Trademark Office on U.S. Patent Application No. 20110288891, titled On-Demand Third Party Asset Rental Platform. The patent application discloses a system that receives a request to rent a vehicle and communicates a conditional rental offer to a plurality of owners who set the rental terms for their vehicles. The most recent non-final rejection was issued by the USPTO last December; it was decided that all of the patent’s claims are unpatentable because “the claims are directed to the abstract idea of communicating a request to rent a vehicle to those who have vehicles to rent.”
Interestingly, Ford filed a similar patent application more than a year after Getaround filed the ‘891 patent application and last November Ford was issued U.S. Patent No. 8880239, entitled Credential Check and Authorization Solution for Personal Vehicle Rental. This patent protects a vehicle having a processor configured to receive rental data which originated from an administrative system remote from the vehicle, specify credentials for authorized users and a threshold speed, enable keyless drive away if the credentials have been satisfied and issue an administrative warning if the vehicle exceeds the threshold speed. It could be argued that the only major difference between the Ford and Getaround technologies is the fact that Ford manufactures a vehicle and can thereby hide their “abstract idea” of personal vehicle rental requests under the guise of vehicle innovation, which Getaround cannot do. It seems that this is an example of the validity of concerns voiced by U.S. patent system stakeholders over the effects of the Supreme Court’s controversial decision in Alice v. CLS Bank on software innovation.
The automotive sector is a field that has seen some very unusual developments in terms of patent activities. A little more than a year ago, Tesla Motors (NASDAQ:TSLA) CEO Elon Musk announced that his company would completely open source their portfolio of more than 200 U.S. patents in the field of lithium ion battery-powered electric vehicles. This announcement was trumped by Toyota Motors (NYSE:TM), which announced this January that thousands of its patents protecting hydrogen fuel cell-powered vehicles would be made available for cost-free licensing through 2020. Ford recently announced a patent licensing scheme which would still require developers to purchase the rights to Ford’s technologies but the move shows that the traditional “not invented here” mentality of the auto industry is currently morphing.