A MASSIVE $8.2 million investment by Hyundai Motor Company into an Australian car-share business aims to boost the South Korean brand’s vehicle sales in a sagging market in a move which highlights the untested waters of profiting from car sharing in Australia.

Hyundai has just announced it has invested $6.2 million in seven-year-old service Car Next Door after earlier spending $2 million for a share in the business.

Car Next Door operates by using customer cars for use by third parties who rent them on an hourly or daily basis to the company’s 150,000 car borrowers.

The move is seen as lifting sales of Hyundai vehicles. Hyundai Motor Company Australia chief executive JW Lee said at the launch of the new Venue small SUV this week in Queensland that dealers were happy with the products offered by Hyundai but said they “wanted more volume”.

Mr Lee said the car-share investment would “open up new mobility options and expand the use of a car for a Hyundai car owner”.

“This is the future of connected green cars, where the ability to car-share is built into the hardwiring of the car, making it easy for one car to be used by multiple people,” he said.

Hyundai sales are down 8.9 per cent this year, similar to the overall market decline. While Car Next Door does not represent a direct sale of a new Hyundai vehicle, it presents a business opportunity for potential buyers by opening the car to part-time rent.

The reason Hyundai is a natural choice for Car Next Door is the brand’s sophisticated Auto Link Premium software that is hardwired into its latest models allows each vehicle to be easily accessed by other drivers. Auto Link can also be retrofitted to some later Hyundai vehicles which do not have the system.

Auto Link allows authorised drivers to unlock and start the car via a mobile phone app, overcoming one of the car-sharing industry’s greatest hassle of accessing lock boxes that contain the car’s keys.

Hyundai is part of a $10 million capital raising round by Car Next Door that now brings the total shareholder investment to $23 million.

It does not represent a direct sale of a Hyundai vehicle, rather makes the new Hyundai car technology suitable for multiple drivers.

Other brands have similar technology, including Mercedes-Benz and BMW which were both involved in a service in the United States that reportedly had its app software hacked and some 100 vehicles subsequently stolen earlier this year.

Commenting on Hyundai’s move, former Australian Automotive Dealer Association (AADA) CEO and now director of Automotive Holdings Group (AHG) Limited, David Blackhall, said many car-makers are involved in car sharing “mainly as a defensive tactic to understand where it’s going”.

“It’s also a low-cost, low-risk way for a ‘challenger’ brand like Hyundai to increase customer experience and ‘soft launch’ complicated and riskier new features like encrypted remote unlocking via smartphone, for example, which many brands have already deployed,” he said.

“Longer term, the economics of car sharing are identical to the rent-a-car market since all input costs are the same.

“The assumed competitive advantages lie in low or zero asset costs (since someone else owns the car) and allegedly easier, lower-cost consumer acquisition together with higher customer satisfaction scores – all unproven and problematic at this point.”

Mr Blackhall said the car-sharing industry had no markers for the effect of the customer experience, customer loyalty or repeat engagements.

“There is no line on future revenue stability. Monetising idle assets is attractive but we need to remember that Hyundai and other OEMs do their accounting on their per unit manufactured cost which is generally 20-30 per cent lower than the dealer wholesale price,” he said.

“Making a fully accounted profit on the true cost of the inventory is a trick that no car-sharing company has managed to master as far as I’m aware.

“I also note that most reports emphasise the low per hour/per day cost of car sharing for consumers. Bottom feeding is rough water if you need to make a margin.

“The barriers to entry in this space are so low that it will continue to spawn new entrants thus putting even more pressure on margins – if any actually exist.

“The real question is where will these start-ups be five years from now?”

While Hyundai hopes to activate sales to people with a plan to share their car for monetary return, Car Next Door makes income by a commission on arranging the rent.

Car Next Door owns some vehicles that are rented and also has access to 16 vehicles from Hyundai.

Car Next Door CEO Will Davies said the service “provides car owners with immediate access to our network of 150,000 car borrowers, making it really easy for car owners to offset the cost of their vehicle”.

“The average car in Australia is used for only four per cent of the time. For that 96 per cent of the time they sit idle, they could be used to create an extra income and help to reduce parking congestion and pressure on our roads,” he said.

Car Next Door is Australia’s largest peer-to-peer car-sharing platform with more than 150,000 people using the platform and over 3000 cars listed. It operates in Sydney, Melbourne, Brisbane, Gold Coast, Canberra and Perth, with car rental costs from $5 an hour or $25 a day plus 21 cents to 45c per kilometre.

The company said the average person in Sydney, Melbourne or Brisbane makes $3500-$7000 renting their car out when they aren’t using it. It also claims owners of utes and vans are bringing in upwards of $10,000-$12,000 a year.

The business is targeting 10,000 cars in Australia by the end of next year.

The Hyundai investment is not unique. Other brands globally have put capital into car-sharing businesses, primarily divisions of their own company.

Subaru formed an alliance with Australian peer-to-peer organisation DriveMyCar in 2017 to share private cars in downtime periods. For Subaru, which had 107 vehicles on the DriveMyCar fleet until it ended the association, it allowed people to test a Subaru product over an extended period before buying.

Mercedes-Benz and BMW merged their car-share businesses under the ShareNow name and plans to invest about $A1.7 billion in the service that will combine car sharing, ride sharing, EV charging and other mobility technologies. Previously called Car2Go and DriveNow, it operates in the US with a base in Chicago.

By Neil Dowling