Analysis. New business models vowing to relieve Bucharest’s traffic woes

Bucharest is Europe’s most congested city. In the face of local authorities’ inertia, solutions proposed by emerging technology-driven business models promise to offer experiences better suited to their clients’ needs as well as help tackle the capital’s traffic troubles.

In February 2017, Bucharest was ranked the most congested city on the continent

and fifth in the world by TomTom’s Traffic Index. This means that, on average, Bucharest drivers can expect to spend 50 percent extra travel time stuck in their cars, more than inhabitants of global cities like New York, Istanbul, Rio de Janeiro and Beijing, which count between 8 and 21 million people. Spending an extra hour daily in one of the 1.2 million cars spewing pollutants into the air brings fuel consumption up, and, predictably, causes air quality to plummet, and with it the general mood and the overall quality of life of the city’s inhabitants. It comes as no surprise then that this year Bucharest was ranked the 9th most polluted city in Europe by Numbeo and has yet again missed the chance to make it into the top 100 cities on the latest Mercer’s Quality of Living Rankings.

In the face of the city’s mounting traffic problems, the most pressing of them being, alongside traffic-clogged arteries and the ensuing air and noise pollution, the poor state of many roads , scarcity of parking spots and the increased age of the car park, local authorities have been notoriously slow to react. By contrast, cities elsewhere are leading the shift to a new, technology-powered paradigm of urban mobility that challenges the idea that rising prosperity always triggers increased car ownership and use rates. Already regularly holding car-free days on its central streets, Paris will ban all fossil fuel based cars from 2030, and Oxford is set to become the first city in the UK to ban non-electric cars from its center by 2020. In an even more radical move, Singapore announced a ban on the sale of private cars effective February 2018 and has vowed, like other major urban centres, to increase spending on public transport. If the opinion of the European Agency Medicine (EMA) is any indication, here too Bucharest lags behind many other European cities. As part of its assessment of the city’s bid to host the institution’s headquarters in the post-Brexit years, the agency stated that Bucharest’s ‘availability, frequency and duration of public transport’ only partially meets its requirements, and therefore, raises major concerns over its business continuity, should it relocate here.

But if, apart from few and uncoordinated attempts, the public sector is seemingly immune to current trends, the private sector is cashing in.

Disruptive business models

Legal challenges aside, Uber, to many a byword for disruption, has successfully exported to Bucharest its business model, one of the major global symbols of the sharing economy. At the other side of the spectrum, Porsche Finance Group Romania, the local branch of Porsche Bank AG, made Bucharest one of the first major European cities to experience the product of its think-like-a-startup mentality, the sharetoo car sharing business line for corporate clients. While both provide Bucharest’s digitally savvy crowd with alternative transport experiences, they promise to do so while also benefitting the city they live in.

Since entering the market in February 2015, Uber has attracted 300,000 registered users in four major cities, making Romania the largest market in the CEE, after Poland and well ahead of the Czech Republic, Croatia or Slovakia. Out of those, 250,000 are based in Bucharest.

According to Alexandra Corolea, Uber senior communications associate for East Balkans, the service managed to more than triple its user figures from 70,000 at the end of the first year because many saw and continue to see it as a viable alternative to personal cars. “The service grew also because its reliability improved dramatically – if, at first, a car arrived, on average in 12 minutes, now the waiting time is under 4 minutes. Our objective is to lower the waiting time to under 2 minutes.” Moreover, Corolea explains, as a well-known global brand present in 600 cities in over 70 countries, it is a trusted means of transport for foreign tourists visiting the Romanian capital. Approximately 15 percent of trips in Bucharest are made by foreign tourists, who see it as a safe and hustle-free alternative, she argues, because they can pay digitally without using the local currency and are always on the map.

Additionally, one of the pillars of the shared economy, the idea that everyone can become an entrepreneur, has been well received in Bucharest.

“Currently, there are a few thousand people driving with Uber in Bucharest and their number is continuously growing. “According to an IMAS study we commissioned a year ago”, Corolea explains, “37 percent of them are entrepreneurs or freelancers, 31 percent have full time jobs, while 22 percent are unemployed and drive with Uber while looking for a job.”

According to a survey conducted by the company in October 2017 among 2,770 Uber users, many of them combine the service with public transportation. “One in two respondents prefer Uber or public transportation when they are headed somewhere with limited parking spaces,” Corolea points out. “Moreover, in Bucharest, the service extends the city’s public transportation network – more than 20 percent of Uber rides in Bucharest begin close to a subway station or public transportation hub, especially in the outskirts, which are underserved by public transportation.”

The service, surveys show, has a real impact on decreasing the number of cars in Bucharest. Out of Uber’s 250,000 registered users in the capital, a quarter of them, a 2016 IMAS revealed, are using their personal car less. Not least, Corolea argues, according to a 2017 survey by IRES, 7 out of 10 Uber users see the service as a viable option to car ownership. However, by giving access to its network to partners driving a car that is up to 15 years old, the company may undo some of the benefits connected to that.

Experience vs. ownership

Launched in October simultaneously in Romanian and Austria, sharetoo made Bucharest one of the first two cities where the group started the business, after a successful pilot project ran in 2016 under the RideOn brand.

According to Porsche Romania general director Brent Valmar, the fact that millennials value experiences above ownership was a crucial factor in the group’s decision to create the sharetoo service. In doing so, it joined an ecosystem of service providers that enable access to products without the burdens of ownership, the cornerstone of the sharing economy, while pouring its resources into a market sector that is predicted to go big in the coming years.

According to Global Market Insights Inc., the car sharing market is expected to record a whooping 34 percent growth over 2016-2024, with a collection revenue of more than USD 16.5 billion by 2024.

On top of that, Valmar argues, the service is the Group’s answer to the evolution that is transforming the auto industry. “We are witnessing a paradigm change that will most likely influence all our lives, to some degree – if it hasn’t already. Disruptive transformations such as industry electrification, digitalization and connectivity, autonomous driving, online sales and car sharing, are already making a mark both on our personal and professional lives.”

The introduction of the car sharing service, David Gedlicka, CEO Porsche Finance Group points out, directly reflects the changing needs of the customer. “Young people think differently about cars now – they need different cars at different times, depending on what they want or where they want to go. They love testing new, modern cars and value new experiences. We cannot skip these trends; our world is changing and so is our business. So for sure the concept of car ownership and the idea of buying a car which you will drive for 20 years is history.”

Data collected by TomTom shows that commuting wreaks havoc on Bucharest streets, causing most of the traffic congestion. According to the latest figures, it triggers a massive 90 percent increase in morning peak travel time compared to a free flow situation, and a 98 percent such increase in the evening. That is why, it makes a lot of business sense that the company decided that sharetoo should target the corporate sector first.“The corporate sector is where we have initially identified an existing need and we have designed the product and the packages around it.

Initially, it was tested by Porsche employees and at a later stage by the company’s strategic partners.

Each car in the fleet is operated via an interface that enables fleet management and monitoring and allows users to open and close the cars directly from their smartphone, using an app available on Android and IOS systems. “Payment is made independently from the app, via other channels. This approach makes the entire customer journey more pleasant, smoother and easier – and this is essential for a service that promises flexibility, speed and efficiency. Customers should be able to reserve a car within minutes, access it immediately and without any extra steps – otherwise the whole product idea is lost,” Gedlicka explains.

According to Gedlicka, companies benefit from the opportunity to adjust the fleet of cars, which includes electric vehicles, to their specific needs, not just in size but also in terms of car types. In their turn, employees get access to new and modern cars kept in excellent condition, which they can also reserve and use for private purposes.

As such, the service is projected to help bring down the number of cars in the city. “In Bucharest, we believe sharetoo will contribute to the improvement of traffic conditions and to reducing pollution levels, as the employees of our corporate customers can use this service both for business and private purposes,” Gedlicka explains.

“The Romanian auto industry is currently facing a huge challenge, as the country has one of the most aged car parks in Europe,” Valmar, current vice president of Romania’s Automotive Manufacturers and Importers Association (APIA) argues.

“We estimate that there will be around 600,000 second-hand cars that will have entered Romania by the end of 2017 and over 70 percent of them are generally over 10-12 years old. This has serious implications on the traffic conditions and pollution levels. Sharetoo can help alleviate this problem by supporting some of the most intensive car users in big cities, corporate customers, in increasing their efficiency with less cars on the road, less pollution thanks to new, modern technology cars and safer traffic conditions.”

Currently providing pick-up and drop-off stations at the customers’ headquarters, the service is projected to extend to private clients at group level in about a year’s time.

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