Motivated by the involvement of Daimler and BMW in the car sharing business we consider an OEM who contemplates introducing a car sharing program. The OEM designs its product line by accounting for the trade-off between driving performance and fuel efficiency. Customers have different valuations of driving performance and decide whether to buy, join car sharing, or rely on their outside option. Car sharing can increase the profit from selling. This happens when the OEM prefers to serve the lower-end customers through car sharing and the higher-end through selling. In this case, car sharing increases the efficiency of the vehicles used for the lower-end, and the price charged to the higher-end customers. This is more pronounced for higher-end OEMs, which may help explain Daimler's and BMW's involvement in car sharing. Despite the higher efficiency, car sharing may lower the OEM's Corporate Average Fuel Economy (CAFE) level even when it increases profit and decreases environmental impact. CAFE levels better reflect the environmental benefits of car sharing when they are based on the number of customers served and not the production volume. Finally, if anticipating aggressive CAFE standards, OEMs may include car sharing to better absorb the increase in the production cost
