Mitsui's Stake Validates Singapore's Car Sharing Initiative

Mitsui & Co, a Japanese conglomerate with interests in a range of industries from logistics to finance, on Monday took a 58 percent stake in Singapore-based Car Club, Asia's pioneer car co-operative. Mitsui, which declined to say what it paid for the stake, plans to use Singapore as a springboard to expand its car sharing business around Asia.

Car Keys
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Car Keys

The investment by Mitsui, which started its own car sharing company in Japan two years ago, validates Singapore's early efforts to promote the city-state as a test bed for car sharing initiatives.

"We chose Singapore because Car Club has been operating for the past 13 years, and Singapore was the very first city in Asia to adopt car sharing. Car Club's experience made it an attractive option" to spearhead Mitsui's regional push, said Tatsuo Hirase, deputy general manager of Mitsui & Co.'s automotive strategy department.

Backed by Mitsui, Car Club will invest $30 million over the next three year to quadruple its fleet to 400 cars in 90 locations. The company hopes to expand to cities like Hong Kong, Taiwan, Seoul and Shanghai once the Singapore operation has its new, larger fleet on the road, says Hirase.

Car sharing, where people rent cars for short periods of time, often by the hour, is attractive to customers who make only occasional use of a vehicle, as well as others who would like occasional access to a vehicle of a different type than they use day-to-day. While the concept started in Zurich back in the 1940's, it has gained traction in Asia in recent years as an energy-efficient, ecological alternative to car ownership; and as regional cities get increasingly crowded.

The global financial crisis in particular, has been a boon for this niche market in countries like Japan, as many budget-conscious consumers took to car sharing as a cost-effective option to get around. A number of companies have since jumped to meet growing demand, says Shimpei Ichimaru, with the Foundation for Promoting Mobility and Ecological Transportation in Japan, and says more than 30 companies now offering car sharing schemes in the country.

Mitsui has 5,500 members in its car sharing network in Tokyo, making it one of Japan's largest. The company's move to acquire Car Club brings car sharing full circle - back to the country that founded Asia's first car cooperative scheme.

In 1997, Singapore-based NTUC Income, set up a car co-op with encouragement from the Singapore government. Honda followed suit in 2002, and by 2007, the two pilot programs, which had developed into independent commercial ventures, had 8,500 members between them, making Singapore Asia's biggest car sharing hub. But the high costs of maintaining its fleet of hybrid car share vehicles took its toll on Honda, which exited the business in 2008. NTUC also closed shop two years later to focus on its core insurance business. The management who ran the NTUC's car share unit bought over the company and renamed it Car Club.

Car Club's managing director Lai Meng, who ran the operation under NTUC Income, says the company was profitable for most of its 12 years of operation — but has the capacity to grow much larger today than it did under its previous owner. "Car sharing was never a core business for NTUC Income. It was really a pilot project.

The firm currently has 2,300 members and a fleet of 92 cars at 40 locations. The company expects it can scale up to 10,000 members within three years, Lai says. Backed by Mitsui, which is prepared to invest to grow the business, Car Club is well positioned to expand quickly domestically, and later, abroad, says Lai.