Boasting 500,000 members, double-digit growth rates, and the largest selection of vehicles, Zipcar has firmly established itself as the leader in car-sharing programs. And while profitability for the business has yet to emerge, the demand is certainly there. Car ownership in many of the largest cities throughout the world has recently been flat or in decline, as major urban centers become increasingly crowded, with cities like Tokyo, New York, and London expected to see declines of car owners per capita over the next 15 years. Of New York residents, only 44 percent own cars. Analysts and researchers estimate ten million drivers in the U.S. alone are open to participating in car sharing programs and car-sharing program memberships will rise to around 4.5 million in the U.S. and 5.5 million in Europe by 2016.

The increasing business of car-sharing has already begun to encroach on the market for rental cars, and companies such as Hertz and Enterprise have developed their own car-sharing programs to supplement their rental businesses. Recently one unlikely group of organizations has taken its first steps in this segment as well—namely, automakers themselves.

Automakers are hoping to reach this emerging target market in major urban areas— young, well-educated drivers, roughly age 18 to mid-30s, with good salaries, who are actively concerned about sustainability, pollution, and traffic congestion issues. Unlike past generations, they no longer view car ownership as a status symbol; they focus more on the convenience and practicality issues related to car ownership. BMW is looking to capitalize on this market with a new program called “BMW on Demand,” which it is launching in Munich, Germany. Connecting with this demographic could also have long-term benefits for BMW, as establishing a brand connection with these new customers might draw them to the company if and when they do decide to make a car purchase.

Car-sharing services cater to this demographic particularly well, as they provide the practical aspects of car use without the financial burdens of ownership. They also provide flexibility to the customer based on his or her needs at the time. For instance, although a potential customer might not normally buy BMW’s M6 sport coupe with its $102,350 price tag, she could rent one through the “BMW on Demand” program for a special occasion and pay only about twice as much per hour as she would for BMW’s compact 1 series at about $22. Car-sharing services can offer flexibility of usage as well, allowing opportunities for customers to avoid late return fees by extending reservations, as when the driver might be stuck in a traffic jam and not be able to get the vehicle back on time. Daimler’s car2go service allows for one-way travel as well; drivers are not required to bring the car back to where they found it.

Automakers’ car-sharing programs seem to be catching on. Daimler piloted its car2go program in Ulm, Germany, and now has over 20,000 members; that’s 15 percent of the city’s total licensed drivers and one-third of those between ages 18 and 36. When it brought the pilot program to the United States, via Austin, Texas, over 10,000 members signed on in the first 10 months, half of whom fit the 18 to 36 age bracket. Rentals averaged 30 to 60 minutes.

As Daimler plans to extend the program to Hamburg, Germany, and other locations, it’s making investments in cars specifically designed for car sharing. A special car2go version of Daimler’s Smart was introduced with features designed to support various car2go operational systems, like an onboard immobilizer and telematics unit. Many of the cars in the Hamburg program will be fitted with gasoline engines, as opposed to diesel, using start-stop technology better suited to urban driving.

With many of these programs still in the infancy stages, it is difficult to tell how profitable they are and whether they can operate sustainably in the long run. But at least one thing is for certain: as new consumer patterns emerge, companies like BMW and Daimler will have to respond to keep up. By creating programs like BMW on Demand and car2go, these companies are paying attention to who these new consumers are and what they’re looking for.

Discuss environmental factors related to population that are changing the way certain people approach car buying and are thus creating new market segments.