Economy, Business And Markets

Car Sharing in Tehran?

Car Sharing in Tehran?Car Sharing in Tehran?

T ehran has a huge pollution problem. We all know this to be one of the bugbears of living in this city. More than 17 million vehicles are currently commuting on Iran’s roads, a figure that is believed to be a lot higher than these roads can handle, due to the doubling of the population over the past 30 years. Within Tehran – a city designed for, at most, four million people – the population has shot up to 12 million and Tehranis own around three million private vehicles according to data released by Tehran’s municipality.

Numbers reported by the World Health Organization show that four of the 10 worst-polluted cities in the world are in Iran, Newsweek magazine said back in March. Among the worst polluted cities in the world is the southwestern city of Ahvaz, which by WHO’s estimates has three times the concentration of pollutants as Beijing.

Now cometh the answer! Car sharing has been mentioned in some circles as an idea (and business) to help reduce pollution and congestion. In theory, the concept that has helped cities across the globe fight pollution could be enacted in the Iranian capital.  However, there are issues that should be addressed before anyone thinks about investing in such a venture.

 Roads Filled to the Brim

Car ownership in Iran has continued to increase in recent years – despite economic restrictions and the ongoing sanctions against the country. The problem for the country and more specifically the cities is that the current rate of urbanization is causing a nightmare for municipalities, in terms of the number of vehicles on the streets.

Iran’s road system requires a complete overhaul in order to keep up with the population growth and the increasing number of vehicles, Minister of Roads and Urban Development Abbas Akhoundi said last Wednesday, according to Mehr News Agency.

Akhoundi said that with the increasing rate of car ownership – a right that Iranians have always aspired to and is now taking its toll on the road system – the total value of the country’s roads stands at about 20 trillion rials. Eight trillion rials is annually needed for maintenance, said the minister.

Iran’s roads don’t have the capacity to handle the growing number of vehicles. In 2012, WHO stated in a report that Iran had the highest number of deaths caused by road accidents in the world.  “Around 55 people on average die in Iran on a daily basis due to road accidents,” deputy head of Iran’s Traffic Police Mohammad Khosravi said recently, citing Iranian Forensic Medicine Organization statistics.

 Innovative Solutions Emerge

Many would say that car ownership here is seen as a highly prized social marker. However, there is a growing trend to develop the public transportation in urban areas, whether it be subways, bus-rapid-transit systems, congestion zones and special coach lanes. While these public systems help lessen the burden of the urban landscape, they can only be accepted as part of the wider solution to the problem facing cities. Ultimately, there are situations when people are going to have to get behind the wheel of a private vehicle, because as good as the public transport system is, it doesn’t cover everywhere.

Although an unheard of idea in Tehran, neighboring countries such as Turkey and others further afield like India, have begun innovative projects to lessen their traffic problems in recent years.

In Turkey’s Daily Sabah, an article about the experiences of a car sharing scheme in the country’s economic capital Istanbul showed reticence amongst locals to participate in the car sharing scheme. The article said that Istanbul locals seem unwilling to exchange comfort for speed.

Nevertheless, with the introduction of car-sharing companies in the Turkish market, mindsets began to change. People started to accept that having a car left idle over 90 percent of the time could be exchanged with the immediacy of car-sharing.

Two companies offering the service in Istanbul, Mobicar and Mobilizm, emerged to fill the void in the market. Mobilizm, founded in 2011 was the first car-sharing company in Turkey with 60 cars serving over 4,000 people. Mobicar founded later in 2013 had 41 cars with just over 3,500 participating in their scheme. The companies charge customers 60 Turkish Lira for initial subscriptions and 0.55 lira per kilometer.

Mobicar’s co-owner, Emir Gunel, told Anadolu Agency that the company aims to integrate its car-sharing service with the city’s transportation gird so that it can help remedy the chronic congestion problem. “We want to offer an easy ride to people.”

However, he stated that so far neither the state nor local government has provided any incentive or assistance to car-sharing companies. “This is because they could not appreciate car-sharing’s potential,” Gunel said.

 Challenges of Sharing

If car-sharing was brought to Tehran, would the same situation occur within this market?

Whilst researching for this article, the Financial Tribune had the chance to talk with one of Tehran’s planning officers, who said that offering a system like car-sharing in Tehran is very difficult for a number of reasons.

Firstly, insurance premiums would be incrementally higher due to a greater chance of car damage as Tehran’s urban structure, although improving, is somewhat outdated, forcing drivers to park their vehicles on the streets -- a difficult task in many areas.

Another issue is that there is no precedent for this in the Iranian car insurance industry and many insurers would not accept fleet insurance with so many participating drivers.

Also, many people in Tehran are too attached to their current “somewhat comfortable commute.” He suggested that it would take sea change in the mentality of the Tehranis to sell up their sole vehicles and participate in a car-sharing scheme.

A further potential problem future investors could face, if they were to initiate a project like car-sharing, would be whether they would choose high-end vehicles, say Mercedes-Benz, Toyota and BMW, or they would focus on more low-end vehicles abundant in the market. Both have their merits and potential markets. But focusing on a high turnover, low cost market, which would be littered with damaged vehicles, would attract negative press coverage.

Looking at similar highly congested metropolitan markets like Turkey suggests that accidents and overall damage to cars is likely to be a long-term cost for any potential car-sharing company, especially because Iran is said to have one of the highest road accident rates in the world, save for cities in South Asia. If any company was to offer car-sharing to the mass-market it is likely that overall deposits would be higher for Iranian car-sharers.

At any rate, pollution and congestion may partly be addressed via a car-sharing scheme, though the challenges in doing so are not by any means undemanding. Nonetheless, that is how all novel solutions are, hard to apply but potentially rewarding. God knows Ahvaz needs it.