30 Mar 2008

Half a Car Will Do

Warren Buffet's fractional ownership firm NetJets is entering the Indian market. This set me thinking, why should fractional ownership be limited to airplanes? Can we have fractional ownership for, say, cars? Many of us go to and from office in office cars and need personal vehicle only once in a week or less. Here's the idea: every apartment complex provides a bunch of cars that tenants can use. There's no driver. You just take the keys when you go out, and are charged by the hour. When you return the car, you're expected to leave as much fuel in the tank as there was when you took the car. If there's more, you're paid for the difference; if less, you pay. Basically it's like a private car that you own for X hours and pay accordingly. Every apartment complex in India has a bunch of parked cars almost all the time. This is a waste. Just as airlines maximize profits by keeping planes in the sky as long as possible, it's better to have fewer cars that are on the road more of the time.

How do we deal with contention, when lots of people want to go out? Reserve a vehicle the previous day. That way you can plan a trip assuming car availability. But what if everyone wants to reserve a car for Friday evening? The answer is bidding, as in a market economy. If bid prices become too high, that's the logical time to add another vehicle. Or only some subset of the people in the apartment can buy the additional vehicle. Why should every vehicle be (partially) owned by everyone? Some smaller group of people who don't mind paying more can buy an additional vehicle of their own that only they can use, for instance.

This is not a personal car, but an interesting midpoint between a taxi and a private dedicated car. Not only does it come cheaper, but it also has other benefits of its own. For instance, an apartment can maintain cars of different sizes. Sometimes a small, cheap car is ideal. At other times, you may want a more comfortable car, say if you're driving for a long time. Or a bigger vehicle, if it's an extended family trip. Why should each person or family have only one car?

More possibilities open up -- apartments can buy cars that last for a long while. If the car is used enough, it makes financial sense to pay 40% more for a car that runs for twice as many kilometers. This is a good remedy to planned obselescence.

Also for people who can't afford a dedicated car, this makes more financial sense -- students, people of lower income groups, people just starting work, etc.

Take it one step up -- the city can maintain a bunch of vehicles that people pay per use. This may not work in all countries. But I'm keen to see apartments that have shared cars, for now.

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