Hello, goodbye to short-term rentals

While major automakers have been pulling out of short-term rental programs, new players are nonetheless pushing into the space.

Among the companies still placing bets on this part of the mobility revolution are PSA Group and most recently, Penske Automotive Group.

But experts say it is a difficult landscape for any company to navigate — especially without a stable business structure.

"There's a lot of operational challenges with running this kind of business. So far, no one has come up with a viable operational model that makes commercial sense," said Sam Abuelsamid, principal analyst at Navigant Research. "For a lot of use cases, it's less convenient than just opening up the Uber or Lyft app and requesting a ride."

General Motors' Maven announced its venture would exit eight cities in May.

BMW and Daimler have recently melded their DriveNow and Car2Go into a joint venture called Share Now, which combined, they say, comprises the biggest free-floating short-term rental fleet in the world.

However, Share Now announced plans last month to scale back on its operations and pull its vehicles from five major North American cities by the end of 2019.

Penske Corp. launched its short-term rental pilot in Washington, D.C., and Arlington, Va., just last week. Penske Dash is a joint venture between Penske Corp. and Penske Transportation Solutions.

"When you think about '19 and beyond, as we see technology and we see ride-sharing and subscriptions, we think this could be a potential business for us," Penske Automotive Group CEO Roger Penske told Automotive News in January.

The leader of Penske Dash local operations, Paul DeLong, previously was CEO of the scaled-back Car2Go North America.

Michael Montri, COO of Penske Dash, told Automotive News in a statement that mobility as a service is part of a broader change in private car ownership.

"As the automobile industry undergoes rapid change, alternative transportation models are becoming more commonplace, particularly in densely populated urban areas," Montri said. "Our entry into any market will be methodical as we grow in partnership with local communities, pursuing customer satisfaction and repeat business as primary metrics rather than number of users or vehicles."

France's PSA Group has also been building on its strategy to make a comeback in North America by offering different mobility products, including Free2Move.

Free2Move has 600 vehicles serving Washington and Arlington. It has also been active in Europe.

Larry Dominique, CEO of PSA North America, told Automotive News in a podcast interview that reentering the North American market by first offering mobility services allows the company to "approach the market in a different way."

"First, we could actually start to relearn the North American market consumer a little bit," Dominique said. "At the same time, it gives us time to do some of our consumer research relative to cars and brands and so forth, and kind of take our time, instead of just jumping in with quickly homologated cars."

David Liniado, vice president of new growth and development for Cox Automotive Mobility Group, said the starts and stops that the industry has seen with short-term rental programs is less about the financial challenges and more about learning to make the concept scalable.

"If you look at how easy it is to use Uber and Lyft — and you've seen both of those models from a top-line revenue growth really scale, from a geographic coverage really scale — there's really not a lot of friction for the consumer," Liniado said. "If the consumer can't do it easily, they're going to revert to what is the easiest thing to do."

Vehicles are also an expensive depreciating asset that cost a fleet a certain amount each day per vehicle, Dominique said.

Said Liniado: "We're close to a lot of these programs having really positive unit economics for the dealer and fleet owners and meeting the consumer where the demand is. ... Utilization is really the key metric. These vehicles have to remain in use."

He added: "We probably haven't hit the right economic model to scale yet, but in terms of signs of success and is that model getting traction? Absolutely."

Abuelsamid, on the other hand, said he's not entirely convinced there is a sustainable, workable model.

"There's going to be companies that keep taking stabs at this trying to tweak the model, and maybe somebody will figure out a way to make it more cost effective and convenient, and personally, I'm not particularly hopeful in the near term," Abuelsamid said.