Founded in Bavaria in 1912, Sixt is now the largest car rental company in Germany, and one of the biggest in the world. Alexander Sixt, the managing director of the company's corporate development and strategy, explains how he plans to conquer the United States, why young people need him, and how car-sharing services such as DriveNow, a joint venture between Sixt and BMW, are changing views on car ownership.
Handelsblatt: Mr. Sixt, how do you see me as a potential customer? I'm 29, living in Berlin, with no kids and no car.
Alexander Sixt: I read a book about Thomas Edison, the inventor of the light bulb. He said, “We will make electricity so cheap that only the rich will burn candles.” If we apply that to our company, we will make mobility so cheap that only the rich will own a car.
What made you come up with that?
The car is one of the worst utilized assets of the world. On average, it stands around on the street for 23 hours and is used for one hour. The car – a product of a whole lot of know-how and capital – has a usage rate of barely four percent. There are a billion cars worldwide with a value of €16.05 trillion ($20.00 trillion). That’s comparable to the gross national product of the United States. If we succeed in improving the utilization of this capital just a little bit with intelligent network integration, we will have created added-value for the customers and for us.
At what point do you become a threat to the carmakers’ business?
They saw this coming a long time ago. BMW, for example, is fully occupied with urban mobility trends, while others are more hesitant. In the end, every carmaker must ask itself if simply selling cars is its future. Barely 10 years ago, more than half of those under 29 had a car. Next year, it will only be a third. Whoever gets €900 from their grandma today has a choice of investing in a used car or an iPhone.
Does that mean you are observing a shift?
It has been going on for some time. Many laughed when we began a car-sharing service in 2011. At the time, the whole German market had 150,000 members. Today, DriveNow alone has over 350,000 members, making it the market leader. Quite a development. When Sixt started over 100 years ago, the car was something completely new.
Where will you be in 100 years?
In any case, global market leader. We have grown a thousand-fold in the last 40 years alone. Our definite corporate planning is set out for two, maybe three years. There are four major areas of strategy.
And they are?
First of all the United States, the largest car rental market in the world. In Miami, we now have a market share of about eight percent, more than the market leader. If we can take over the 100 largest airports in America and gain a market share of five percent there, Sixt’s entire sales would more than double.
What other areas for growth are there?
The second subject is European expansion. In 2013, we pushed Hertz out of third place in Europe and are only one percentage point away from Avis. France, for example, is developing in an unbelievably positive way. We also launched a relatively large-scale television campaign there, since we are primarily banking on private customers in France.
Which brings us to subject number three. We have grown unbelievably fast in the last couple of years. Now it is a matter of further developing our organization to remain lean.
And number four?
We want to strengthen and expand our DriveNow and myDriver services. After one and one-half years, myDriver, our chauffeur service, has booked about 150,000 trips with about half of them business customers. We are starting to internationalize DriveNow. We just opened in Vienna.
Americans like to share. Each year they spend $24 billion renting cars.
What are the next steps for DriveNow?
More cities in Germany could be added. In the current business model, however, they must have at least 750,000 residents and a certain density because the cars always have to be within the customer’s reach. For certain, two to three European cities will be added in 2015. And we are currently discussing with our partner BMW about how to manage the planned expansion in the U.S.
Yet others are already more international. Are you sometimes simply too late and others have already secured the licenses?
Others also withdraw from their original locations, we don’t. In car sharing, I don’t believe in being the first mover, but rather the fast follower. Take Hamburg. We weren’t the first there either, but before we started, we already had 30,000 members. We have tried to make the product as simple and uncomplicated as possible for the customer.
Aren’t things getting a little crowded in the car sharing market? Besides you, Daimler, German Rail and many others are doing it. Internet companies such as Google are currently seeking access to the car market. Should you be afraid of them?
You have to consider the various aspects of it. For the most part, it’s investors who see an unbelievable market opportunity in this area. And, it is also a self-fulfilling prophecy. When one venture capitalist invests, the others follow suit. Take Uber, the ridesharing company. It is now valued at $18 billion. With all due respect, there is a lot of fantasy in that. Seen in the light of day, they are doing nothing new. They receive ride requests and dispatch drivers. My grandpa was doing that already.
So no threat?
No. They prepared the way for us to launch our chauffeur service. Sixt, however, offers the full chain of mobility, from car sharing for a minute to leasing for several years. That is our great strength. Ultimately, there must be a reason why we are the most profitable car rental company in the world.
You mentioned the U.S. as an opportunity for growth. For DriveNow, too?
We have six or seven cities on our short-list. The problem is managing the parking. There are cities where you can park for one day only on the left side of the street. Germany isn’t the only place where they come up with things to make our business very complicated.
But the fundamental problem is certainly that Americans tend not to want to share cars, isn’t that right?
Americans like to share. Each year they spend $24 billion renting cars. At the airport in Miami alone, there are 35,000 cars waiting. That’s equal to two-thirds of the fleet we maintain in Germany. Americans are much more flexible and mobile than we are because they are less rooted. Just look at the huge grounds of their universities. This is a wonderfully fertile ground for us. Doing car sharing in Silicon Valley would be ideal for us.
Are you meeting with opposition there?
There is often the hypothesis that car sharing will add to the normal car traffic in cities. We can prove that people, at least, sell their second car when a sensible car sharing service is offered. The investors already understand that and have pumped billions in the market. Now, it’s only a question of when the local authorities realize it.