Sustainable Development, Business and Society

Final Assignment

New Type of Car Sharing in Japan

INSTITUT SUPÉRIEUR DE GESTION

INTERNATIONAL MBA PROGRAM

MAKI MATSUMOTO

JULY, 2011

EXECUTIVE SUMMARY

In this paper, the current market situation and problems of existing car sharing in Japan

will be discussed, and then the possibility of a new car sharing service will be analyzed.

The Japanese car sharing market is growing rapidly, and there is more potential

opportunity to expand. Also, the cities, especially in metropolitan areas in Japan, are

becoming denser and denser, as a large number of tower residential buildings have

been built in the last few decades.

The main idea of the new car sharing is that the each service network is limited within

residents in a tower building, and cars shared is not provided by the car sharing

company, but residents who own cars in that building.

The main benefits would be;

1. For users:

(i) Easy access for users to shared cars, just take an elevator.

(ii) Various car type is available

(iii) Face to face communication is possible with car owners

2. For car owners:

(i) Able to reduce financial burden of owning cars

(ii) Face to face communication is possible with car users

3. For the company:

(i) No large initial investment is needed for the company

(ii) Able to start with one site, and then expand after appropriate analysis

One critical issue need to be solved is the insurance policy problem. In order to

successfully implement this new business, it is essential for the new entrant to include

insurance re-writing service, as limited driver clause they already have and required

paper works will prevent potential offerer of cars to enter this new car sharing net work.

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TABLE OF CONTENTS

Executive Summary....................................................................................2

1 Overview - Car Sharing in Japan...............................................................................4

1.1 History 4

1.2 Current Market 4

1.2.1 Growing Fast............................................................................................4

1.2.2 More potential Growth................................................................................5

1.3 Problems 6

2 New Car Sharing in Japan........................................................................................8

2.1 Business opportunity 8

2.1.1 Benefits...................................................................................................8

2.1.2 Potential Risks and Problems....................................................................10

2.2 Issues to be solved 11

3 Conclusion and recommendation............................................................................12

References................................................................................................................13

Appendix...................................................................................................................14

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1 OVERVIEW - CAR SHARING IN JAPAN

1.1 HISTORY

In Japan, car sharing began in late 1999 as a social experiment lead by Ministry of

Land, Infrastructure, Transport and Tourism, and Ministry of Economy, Trade and

Industry. Unlike the other western countries, where the initial idea of car sharing was

to reduce the number of cars owned, it started in Japan mainly to demonstrate and to

test new technologies, such as Intelligent Transport Systems and electric cars.

In 2002, Orix Auto Co, and NEC Co., established a joint venture called CEV Sharing

Co. and started Orix Car Share, to test whether the car-sharing business model used in

other countries could be successfully applied in Japan1. In 2003 and 2004, some small

companies entered into the market, and in 2005, Mazda Rent A car, a major rent a car

company at that time, started car sharing service called CarShare24. Now owned by

Times 24 Co. Ltd. , the leading company in parking business, this car sharing service

changed name from CarShare24 to Times Plus and still operating as the number one

company in this industry. Many other companies, both large and small, entered into

this growing market. (Appendix)

1.2 CURRENT MARKET

1.2.1GROWING FAST

In the last few years, car sharing market has shown rapid growth in Japan. According

to the research by Foundation for Promoting Personal Mobility and Ecological

Transportation, 31 car sharing companies are offering the service, 4,174 cars and

1 JFS Newsletter ” Car Sharing in Japan: Growing in Popularity, Integrating into Transport Systems” No.76 (December 2008)

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79,993 members are in the car sharing market in Japan as of January 2011, 31.

(Appendix)

The number of cars tripled from the previous year and the number of members is

growing even faster, increased by 450% in 2011.

Figure 1 Growth of number of cars and subscriptions

Source : Foundation for Promoting Personal Mobility and Ecological Transportation

1.2.2MORE POTENTIAL GROWTH

Market is not only fast growing, but more potential growth can be expected in this

market. First of all, potential growth opportunity for the market can be seen from the

number of car sharing subscription over total population. It is still only 0.06% in Japan,

while in Switzerland, where car sharing first started, more than 1.22% of total

population is now members of car　sharing services. In other words, there is a huge

room for further growth　in Japan.

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　# of

cars

# of

members

Total

Population

Member

/population %As of

the U.S. 8,120 448,574 309,140,000 0.15 2010.7

Canada 2,285 67,526 31,610,000 0.21 2010.7

Switzerland 2,350 93,700 7,700,000 1.22 2010.6

UK 2,259 112,928 61,400,000 0.18 2010.1

Japan 3,911 73,224 127,692,000 0.06 2011.1

Source: CarSharing.NET, Mobility CarSharing, Car plus, Foundation for Promoting Personal Mobility and Ecological

Transportation

Another is, as car sharing is more and more recognized by Japanese people, new type

of car-sharing system is also growing. Nowadays, some of the tower residential

building offer car sharing service within the dense community. For example, The

Tokyo Towers, built in Tokyo on 29,700m2 land space in the center of Tokyo, offers car

sharing service in corporation with Orix Car Sharing. In this 58 stories twin towers,

there are 2,799 apartments but only 1,024 parking spaces are provided. When

apartments were sold in 2008, more than 1,200 families asked for the parking slots,

meaning approximately 200 families were not able to obtain space for their cars and

needed to find parking space outside the building, or give up their cars. So, Orix Car, a

subsidiary of Orix Real Estate who was one of the developers of the towers, decided to

offer car sharing service within the towers and over 600 families expressed

considerable interest for being a member. Although exact number is unknown,

approximately 50 or even more residential buildings seem to be offering similar

services today, especially metropolitan areas in Japan.

1.3 PROBLEMS

Although there are so many merits in car sharing from environmental point of view,

there are also some practical problems. One of these is the location of the car. The

number of car stations is increasing rapidly, yet it is still limited and requires users

some time to actually get to the points of cars. The car sharing services offered to

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residences in the residential building are not the case as cars are located in the same

building, but there is other problems such as people are not always able to reserve a

car when they need, as the number of car shared is limited. For instance, previous

case of The Tokyo Towers, only four cars are offered to share. Also, car stations are

usually located in the public parking areas, so users are responsible for any damages

until the next user. Some users are afraid of any charges claimed by the car sharing

company for unknown damage after returning the car to the parking spot. Again, this is

not the case for the service within the residential building, as parking spaces in the

tower buildings are usually located in the underground level or closed area with

security.

Limited car station points, limited number of the car and responsibility problem are

probably also common in other countries. However, there are some problems particular

to Japan. One of the main issues is that the Japanese people are not used to share

things with strangers, as the Japanese culture is highly corrective with closed

community spirits. People would share with people in the community they belong, but

have hesitation to share with others who belongs other communities.

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2 NEW CAR SHARING IN JAPAN

2.1 BUSINESS OPPORTUNITY

In this section, new type of car sharing is introduced and analyzed; sharing unoccupied

car within tower residential buildings among people who live in that buildings.

The main idea is to ask residences of a tower building who already own cars,

contracted parking lots, not use their cars on daily basis, and have interests in sharing

unoccupied cars to cover their fixed costs such as parking fees, taxes, and insurances.

2.1.1 BENEFITS

In this model, possible benefits are;

4. For users:

(i) Easy access for users to shared cars

As a car is located in the same building, there is no additional

transportation need to get a car, as they generally have to only go down to

the parking level by an elevator from his or her apartment. Also, as parking

is located secured site with usually surveillance cameras and sometimes

even security guards, responsibility problems also can be solved.

(ii) Various car type is available

Unlike existing car sharing companies that usually offer certain type of car,

the users can choose from a number of cars types as each owner have

different preference on their cars.

(iii) Face to face communication is possible with car owners

This model enable users to know car owners since both users and owners

of cars are member of the same community, and repeated usage would

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create repeated communication, or even closer relationship. This

communication and relationship will bring a sense of reassurance to users.

5. For car owners:

(i) Able to reduce financial burden of owning cars

In addition to the purchase price of a car, owners need to pay some fixed

expenses such as parking fees, tax, and insurance. These costs are quite

expensive, for example, monthly parking fee in tower building is

approximately USD200 to 400 in Tokyo metropolitan area, and it will be a

great help for owners from financial point of view.

(ii) Face to face communication is possible with car users

This model enable owners to know car users since both users and owners

of cars are member of the same community, and repeated usage would

create repeated communication, or even closer relationship. This

communication and relationship will bring a sense of reassurance to

owners.

6. For the company:

(i) No large initial investment is needed for the company

The barrier to enter into the car sharing market is relatively low as this is

still new market. However, the two leading companies, Orix Car Sharing

and Times Plus, are dominant in the market, as members of these two

represent 75% of total members and provide 60% of cars shared in Japan.

Also, existing car sharing business model requires new entrants substantial

initial investment such as leasing cars, obtaining parking places, and

advertising to the wide population in the operating area.

In this already difficult market condition, sharing unoccupied cars within a

tower building can provide access to a large number of cars already placed

in the building without large capital investment. Also, no large amount is

required on advertisement and PR, as this business model will be offered

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within dense community, so only concentrated information giving process is

needed to be acknowledged.

(ii) Able to start with one site, and then expand after appropriate analysis

Starting with one building as an experiment, then analyze situation,

problem, and then improve for the second site. In this way, the company

could minimize the risk of failure of startup business.

2.1.2 POTENTIAL RISKS AND PROBLEMS

1. For users and owners

(i) Might cause sour relation in case of trouble

If a severe trouble or an accident occurs and could not solve properly, the

owner and user relationship within closed community could have reverse

results, as there is no way to escape from damaged relationship one

established, unless either of them move out from the building.

(ii) Insurance issue

In Japan, car owners are obliged to buy insurance policy for car and driving. In

general, when a car owner buy insurance policy, he or she limits the number of

drivers of that particular car only to family members in order to reduce

insurance premium. This means that if the car owner let someone else, who is

not listed as a possible driver of the car in the contract, drive his car, and if he

had an accident, insurance will not pay to cover any damage caused by.

Therefore, it will be necessary to change the contract if the owner wants to

share his unoccupied car within the tower building.

2. For the company:

(i) No such a business exists in Japan

As this is a new business model for car sharing within tower building that

ask owners to share excess capacities they have, it is uncertain that this

model is accepted or not. Also, according to Hofstead analysis, Japanese

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people have high uncertainty avoidance ratio so that there is a risk that this

whole scheme is not easily accepted to the people in Japan.

2.2 ISSUES TO BE SOLVED

Among above potential risks and problems, the most critical one would be the

insurance issue.

Under Japanese law, all registered cars must be covered by Compulsory Automobile

Liability Insurance (CALI). This insurance is very similar to that are mandatory in other

countries. Although this compulsory insurance is very effective, it is not adequate in

providing coverage for the insured, and it does not cover any repair or replacement for

damage to the car itself. Thus, majority of car owners buy private insurance policies in

order to cover this shortage. According to the General Insurance Association of Japan,,

nearly 80% of car owners buy these voluntary auto insurance policies in Tokyo

metropolitan area, as of March 20092.

The insurance premium is determined by the type of car, number of listed driver, and

age and accident histories of these drivers. In order to reduce premiums, many car

owners limit drivers of the car. Although it is not difficult to change the contract and

expand drivers to unlimited, and this additional cost would be covered by charging

extra fee to the users of their cars in case of offering their cars to car sharing networks,

it is still few paper works to be done and this could be a possible hurdle for owners to

enter into the service. In other words, it is essential for new entrant of this new type of

car sharing to provide rewriting insurance service as well as offering information

network and other related service to potential car offerer.

2 Ownership of Voluntary Automobile Insurance, The General Insurance Association of Japan, 2009

http://www.sonpo.or.jp/archive/statistics/syumoku/pdf/index/kanyu_jidosha_ken.pdf

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3 CONCLUSION AND RECOMMENDATION

As seen previous sections, the Japanese car sharing market is growing rapidly, and

there is more potential opportunity to expand.

In addition to existing general car sharing, there is a possibility to launch new style car

sharing business in Japan; sharing unoccupied cars within a tower residential building,

as this new business model would reduce or solve current problems that existing car

sharing business confronts. In order to successfully implement this new business, it is

essential to include insurance re-writing service, as limited driver clause they already

have and required paper works will prevent potential offerer of cars to enter this new

car sharing net work.

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REFERENCES

Foundation for Promoting Personal Mobility and Ecological Transportation

http://www.ecomo.or.jp/environment/carshare/carshare_graph2011.1.html

CarSharing.NET

http://www.carsharing.net/

Mobility CarSharing Switzerland

http://www.mobility.ch/de/pub/standorte.cfm?staoid=-1

Car Plus

http://www.carplus.org.uk/

JFS Newsletter ” Car Sharing in Japan: Growing in Popularity, Integrating into Transport

Systems” No.76 (December 2008)

http://www.japanfs.org/en/mailmagazine/newsletter/pages/028678.html

Ownership of Voluntary Automobile Insurance, The General Insurance Association of Japan,

2009

http://www.sonpo.or.jp/archive/statistics/

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APPENDIX

Name of Business Start Date # of car stations # of cars # of members

Orix Car Share Apr-02 888 1,274 30,000

Our Car Feb-03 1 3 30

Mobi-System Nov-03 34 300 1,860

Ayato Carsharing System Apr-04 3 5 60

Eco Nori Club Apr-04 4 8 140

Shiki Carsharing May-04 1 1 5

CarCherry Dec-04 6 10 100

Chokomo Club Jan-05 7 10 168

Tims Plus Feb-05 936 1,256 29,719

Windcar Mar-05 95 119 1,958

Catela Nov-05 37 48 1,487

Car Share Kanazawa Nov-06 11 12 109

Kinokanoke vs club Apr-07 1 2 6

Car share Shikoku Mar-08 7 7 165

Ecolo Car Sharing Mar-08 45 67 800

QuiCar May-08 6 9 55

Careco Caresharing Club Jan-09 389 407 7,769

Withree Mar-09 9 12 130

Eco rentA Mar-09 3 6 0

Guliver Care Share Mates Apr-09 9 9 120

Leo Guliver Car Sharing Nov-09 500 500 3,100

Nissan Car Sharing Club Jul-09 1 2 10

Sallato Car Sharing Aug-09 9 9 60

Actio e-drive Oct-09 2 2 12

i share Oct-09 33 33 1,000

Eki-spres Nov-09 6 11 0

Cariteco Nov-09 28 32 750

Sanfuku Car Sharing Nov-09 5 5 63

Machinori-kun Dec-09 3 5 70

Casual Rent a Car Jan-10 5 10 247

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　Total 　 3,084 4,174 79,993

Source: Foundation for Promoting Personal Mobility and Ecological Transportation, As of Jan, 2011

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