Navigant Research Blog

Preludes to Premium Mobility Services

— May 22, 2017

Moving toward a world where individual vehicle ownership gives way to automated mobility services, automakers and service providers run the risk that their differentiated products will become commodities. In an industry that already runs relatively thin margins on top of high capital costs, the thought of becoming a commodity is a nightmare scenario. That is why companies like Ford and General Motors (GM) are experimenting with models that could feature different price points and margins.

Differentiation Necessary

If you use one of today’s basic ride-hailing services, it doesn’t matter if you use Lyft, Uber, Gett, or one of the numerous small services that operate regionally. Using luxury tiers like Uber Black gets users a premium vehicle, but otherwise the service is essentially the same and the prices are usually close. In order to charge a premium price that can generate the profits needed to sustain a business, companies will have to find ways to differentiate.

In a world where the car you ride in becomes random, the overall customer experience of the service will become crucial. That may include being able to specify what type of vehicle you want, guaranteed shorter wait times, access to added services like picking up the dry cleaning or groceries, and more.

In January 2017, GM’s Cadillac division launched Book, a service that enables customers to pay a flat monthly fee and get access to any of the vehicles in the brand’s model lineup. A subscriber may opt to spend the week commuting in an XT5 crossover, switch to an ATS-V performance coupe for a weekend jaunt in the country, or get an Escalade for a family road trip. Cadillac takes care of insurance, detailing, and maintenance.

At the New York Auto Show in April 2017, Lincoln announced its Chauffeur service. As the name implies, Lincoln provides its customers with access to a professional driver when owners cannot or don’t want to drive—such as on a special date night or to pick up the kids from an event. Lincoln screens the drivers and they arrive at the customer’s location on request to drive the customer’s car. Lincoln Chauffeur debuted in Miami and is now expanding to San Diego.

An Automated Future

Hypothetically, 5 to 10 years from now when both of these brands (and others) are offering a range of automated vehicles, it’s easy to imagine a scenario where services evolve to take advantage of that automation. The Cadillac of your choice appears at your doorstep on demand; for certain models like the high performance V series, GM can offer the option for the customer to drive if they choose while others may be automated only. Similarly, Lincoln Chauffeur could be utilized with automation for vehicles that customers buy, lease, or subscribe to on a weekly, monthly, or annual basis. Tesla CEO Elon Musk has also articulated a vision where his customers could make their vehicles available for short-term rentals when not being used.

These and other varieties of services will mean dramatic changes for the automotive retail business, as well the automakers and customers. The choice of whether to lease or buy gets expanded into additional types of payment plans, including by the mile, hour, month, and more. The possibilities will be limitless for affluent customers. For example, a customer may not need to decide what color car they want in their garage; they can order one coordinated to their outfit for the evening. No doubt there will be many more experiments from automakers over the next several years as they seek to navigate their way through a changing transportation landscape.

 

Carshare Services Gear Up for Gig Economy

— May 5, 2017

Younger urban dwellers are increasingly joining the ranks of carsharing, ride-hailing, and delivery service workers, as more and more companies are customizing their offerings for participants in the new gig economy. Driving jobs that offer flexible hours and attract predominantly younger drivers are known as “gigs.” Carshare companies see renting out their vehicles to these independent drivers as an opportunity to grow revenue and increase their brand awareness. Since Navigant Research expects revenue from carsharing programs in North America to surpass $1.1 billion annually by 2021, the combination of gigs and carsharing services represents a significant opportunity.

Maven Gig

Maven, a mobility company launched by General Motors (GM), announced partnerships on May 3 for its Gig program, which includes several services that simplify the process of renting vehicles for multiple services. With Maven’s mobile app, a rented vehicle can be used by drivers for Instacart, a grocery delivery service; GrubHub, a take-out food delivery service; and Roadie, which uses passenger vehicles to deliver packages. The rented vehicles can also be used by drivers for the ride-hailing companies that Maven has had relationships with, Uber and Lyft. Drivers can access their revenue, vehicle, and driving data for all services through one web portal and mobile application.

Maven will broaden exposure for GM’s Bolt battery EV by exclusively offering the car in its Gig program for rent for $229 per week. The program initially launched in San Diego and will include free charging at EVgo charging stations in the area. Drivers can save up to $100 per month in fuel when compared to driving a gasoline-powered vehicle, according to Rachel Bhattacharya, director of Commercial Mobility and AV Fleet Operations at GM.

Bhattacharya said having the vehicles available to drivers full-time enables them to work for multiple companies and switch tasks to match peaks in demand. For example, they can drive passengers during the morning rush hour and then deliver food at lunch and packages in the afternoon. After San Diego, Gig will be available in San Francisco later this year, and then in cities in other states, said Bhattacharya.

Promoting the Bolt is likely to boost EV awareness in areas where Maven Gig is available, as both drivers and passengers new to EVs will gain exposure to the capabilities of the vehicles. Bhattacharya said drivers receive in-person training on the differences in operating and charging vehicles, as well as information from both Chevrolet and Maven.

Maven City Carsharing

Maven City carsharing is available in 13 markets across the United States. In Denver, 200 Maven vehicles are available for rent, including the Chevrolet Volt plug-in hybrid. Lindsey Whiddon, general manager at Maven General Motors, said she is working with property managers to locate Maven rentals and charging infrastructure for the Volts close to the many new high rise apartments and condos in Denver. “Millennials have been quicker to adopt [carsharing],” said Whiddon, so she is prioritizing putting Maven vehicles close to highly dense areas where younger people may not have cars.

Carsharing and Gigs Not Just for Maven

Peer-to-peer carsharing company Getaround also recognizes this opportunity and is targeting freelance drivers via a partnership with Uber that allows vehicles to be rented for $5 per hour, including insurance, gas, and unlimited miles. The vehicles, which initially are available in San Francisco, are being provided by Xchange Leasing, Uber’s leasing program. Getaround also recently raised an additional $45 million in capital investment to continue expanding its carsharing service, which recently moved into the Tri-State New Jersey area. Maven has a similar deal with Lyft to provide GM vehicles to drivers through the Express Drive program.

 

A New Culture for Carsharing

— February 8, 2017

Carsharing continues to make the transition from a startup or non-profit culture to a corporate culture. More and more large companies are entering the space and acquiring smaller carshare services, and automaker services are adding high end vehicles to the quirky two-seaters. But the bigger news may be that carsharing is starting to show traction outside its traditional markets of highly developed car cultures—namely North America, Western Europe, and Japan.

A spate of recent announcements from automakers reflects continuing interest in on demand mobility services—not just carsharing, but also ride-hailing services like Uber and Lyft. The latest automakers to announce carsharing expansions are AB Volvo, the PSA Group, and Daimler AG. Volvo has been in the carsharing business since the late 1990s through Swedish carshare service Sunfleet. In January, the automaker announced it would create a business unit for global carsharing based on the Sunfleet service.

The PSA Group will be supplying EVs for a new carsharing service in Paris, targeting professionals as its primary customers. This mainly seems to entail offering larger vehicles such as the Peugeot Partner and Citroën Berlingo, both small panel vans. Daimler is also making a play for carshare users who want larger vehicles than the tiny smart fortwo vehicle that has made up its car2go fleet to date. But Daimler is going more upscale than panel vans. The company announced that it would begin incorporating Mercedes Benz sedans and SUVs into its car2go fleets in seven US cities.

Experimental Phase

These announcements reflect the wide range of approaches to carsharing that automakers are pursuing. Although automakers are demonstrating real interest in carsharing, they are still largely in an experimental phase, trying out different business models to see what gains traction and what best supports their respective brands. While some will likely find that the service does not suit their customer base or business strategy, the trend of establishing a separate business unit for shared mobility suggests that automakers are taking the carsharing market seriously.

Automakers that see shared mobility as a first application for automated vehicles will certainly continue to pursue these services. Small, quirky startup carshare companies may find it difficult to compete in that environment. It is likely that some small carshare companies will be acquired by automakers looking to establish a beachhead for carsharing in new markets. Note that consolidation is also happening through other big players in the shared mobility space, including Europcar. Through mobility startup Ubeequo, Europcar recently acquired a Milan carshare service called GuidaMi.

But it is even more interesting to see carsharing starting to break through in new geographic regions such as Thailand, India, the United Arab Emirates, and Kazakhstan. These are not necessarily locations that would seem obvious for carsharing—in some cases due to a lack of public transit, which is seen as a supporting pillar to a shared mobility environment. Perhaps most significantly, China is seeing a surge in on demand mobility services, as the government has begun encouraging shared mobility as one of many tools to combat congestion and pollution problems. These new markets have the potential to help the carshare market continue to grow as the mature markets become saturated.

 

Smart Cities Week Highlights the Market’s Transition from Technology to People

— October 6, 2016

CarsharingA key theme reiterated at Smart Cities Week in Washington, DC was the recent evolution of the smart cities market to focus prospective projects more on people and how they would be affected by new technology, rather than the technology itself. As stated in one of my previous blogs, one of the keys to Columbus, Ohio winning the US Department of Transportation’s (DOT’s) Smart City Challenge and beating out the better-known technology centers of San Francisco, Austin, and Denver was the city’s ability to demonstrate that its plan would result in increasing poor residents’ access to new transportation options.

Keynote speakers at the conference also discussed the White House’s recent announcement that it will be providing an additional $80 million for smart city projects in response to the enormous interest that the DOT Smart City Challenge received. The majority of the new funding is expected to go toward the National Science Foundation.

Transportation and Economic Opportunity

Transportation as a connection to social inclusion was another key focus area of Smart Cities Week. US Transportation Secretary Anthony Foxx stated, “We have an opportunity … This is the first time in the history of our nation that we have a chance to build a transportation ecosystem that isn’t weighed down by exclusions, but is built on inclusion.” Again using Columbus as an example, the city is developing an app that would enable residents to pay for a multitude of transportation options (i.e., public transit, ride-hailing, and carsharing) through universal fare cards, with kiosks being set up in poorer communities to allow residents without smartphones or bank accounts to still have access to mobility services. Connecting to the socioeconomic challenges of cities is an important element in gaining citizen support for smart city programs.

City Infrastructure Under Transformation

As cities around the world continue to reach a boiling point in terms of traffic congestion and a lack of parking availability, smart city solutions have the potential to completely transform city infrastructure, improving quality of life and increasing the efficiency of cities. Low-cost autonomous ride-hailing programs could remove much of the need for excessive personal vehicles on the road and alleviate ubiquitous on-street parking. New spaces for walking and bicycling would be opened up, transforming the city into a more inclusive space, with low-cost transportation options for all residents.

 

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