Navigant Research Blog

Ride-Hailing Is a New Tool in the City Planning Toolkit, but Can It Be Managed?

— April 6, 2016

CarsharingstandortWashington, D.C. underwent an accidental experiment in new mobility in March when the city’s subway system shut down for 24 hours for safety inspections. Usually the Metro only closes down in bad weather, but the D.C. system is in a rough state (a subject that could itself be the topic of a weekly series of blogs). Though service interruptions are now the norm with the Metro, shutting down the entire system for a day came as a shock and was only compounded by the short notice given to riders.

Riders had an array of alternatives, most of which are not new: private cars, buses, bikes, and telecommuting. But one thing the shutdown confirmed is that on-demand mobility services have to be seen now as an established modal option in a multi-modal city transportation plan. On-demand services reported significant increases in business on the Wednesday that the Metro shut down. Zipcar had a 50% increase in reservations compared to a typical Wednesday morning, and Lyft reported a 65% increase in ridership. Since carsharing has been around much longer than ride-hailing—and because setting up carshare services requires parking permission from the city—it is already integrated into many cities’ transportation planning. To some degree, working with public officials is built into the carsharing business model.

Flexibility Is Key

Ride-hailing businesses have grown astronomically in a short amount of time, and city officials and regulators have yet to catch up. In addition, ride-hailing’s DNA is that of a Silicon Valley startup that works outside the conventional government/industry nexus. This has fed these services’ rapid growth and helps make them dynamic and flexible. Indeed, Uber and Lyft responded to the shutdown in ways you’d expect from flexible, market-based transportation services. There was a surge in supply, with Uber saying it had 50% more drivers available for service during the morning rush hour than on a typical Wednesday morning. The expected spike in rates charged to riders was muted thanks to this increase.

This flexibility is something that city planning and transportation agencies should take into consideration when evaluating how to prepare cities for spikes in travel demand. Ride hailing will be an important new tool for cities in transportation planning. Of course, cities don’t control this tool, which leads to tension between city officials and the ride hailing companies.

Cities are also legitimately wary that ride-hailing simply shifts travel back to single-passenger vehicles, worsening traffic congestion. The D.C. Metro shutdown also illustrated how that might look, with reports of massive congestion outside Union Station due to taxis and pickup services. However, if ride-hailing affects traffic significantly, it will increase the cost of using the service for riders and make options like public transit and bikes more attractive. Carsharing will be affected by this as well, even though it’s less likely that carsharing could drive an exodus from transit. A hopeful sign of how increased demand may alter the ride hailing market: Uber reports that 1 in 4 customers used UberPool, the carpool version of its service, on the day of the Metro shutdown.

If ride-hailing is now a part of the city’s mobility landscape, it is not likely to remain outside the conventional regulatory system. In our upcoming Transportation Outlook: 2025 to 2050 report, Navigant Research predicts that ride-hailing will become a much more regulated industry over the next 10 years. This will make it less nimble and innovative but will help services grow by ensuring that companies act as good citizens in the cities where they operate.


Here’s How Electric Cars Will Not Cause the Next Oil Price Crash

— March 21, 2016

EV RefuelingLast month, Bloomberg Business published an article titled “Here’s How Electric Cars Will Cause the Next Oil Crisis.” The article outlined how declining battery costs will make electric vehicles (EVs) attractive alternatives to conventional petroleum powered vehicles, which will then lead to rapid market adoption. Consequently, EVs will then fuel the next oil crisis in the first half of the next decade. Historically, the word “crisis” when used in regard to energy commodities means resources are tight and prices are high; in this case, Bloomberg is using “crisis” to describe the opposite—a price crash on behalf of an oversupply of oil.

Semantics aside, Bloomberg’s analysis assumes that when EVs displace as much as 2 million barrels of oil per day (an amount equivalent to the oil glut that spurred the 2014 drop in oil prices), global oil markets will witness a similar price crash as has been witnessed since 2014. Navigant Research agrees with many of the assumptions Bloomberg uses in projecting EV sales; however, the overall premise of the article—that EVs will cause the next oil crisis—is sensationalist. It misses the bigger picture on energy and transportation, and likely works against Bloomberg’s own prediction.

It is true that EVs displace oil; Navigant Research estimates that the total amount of oil displaced by electric light duty vehicles in the United States from January 2011 through December 2014 was roughly 2.1 million barrels. However, focusing on EVs betrays a lack of comprehensive understanding on other trends in the automotive industry that are likely to be far more impactful to oil markets. These trends include improvements in conventional vehicle fuel efficiency, adoption of partially and fully autonomous drive systems, and the increasing growth of mobility programs as alternatives to vehicle ownership.

Missing Pieces

The biggest omission in Bloomberg’s article is conventional vehicle fuel efficiency. It’s not a particularly sexy conversation topic compared to electric drive vehicles; however, a small increase in the average conventional vehicle fuel economy has dramatic impacts on oil demand. Consider this: to accomplish the same 2.1 million barrel EV displacement Navigant Research estimated above, the U.S. conventional light duty vehicle fleet needs to improve fuel efficiency by roughly 0.08% in 4 years, which is nothing compared to regulated improvements that are already underway. Navigant Research estimates that U.S. Corporate Average Fuel Economy (CAFE) standards will increase average in-use gasoline powered light duty vehicle fuel efficiency 22% over the next 10 years. Eighty percent of global light duty vehicle markets are governed by increasing fuel efficiency regulations like CAFE standards; when considering the effects of these policies on a global scale, the oil displacement calculations belittle the oil displaced from EVs.

The only trend in the automotive industry that grabs more headlines than EVs is autonomous vehicles, or self-driving cars. The introduction of fully autonomous vehicles may not be too far off; however, adoption of vehicle connectivity and driver assistance systems that allow partial autonomous operation has been underway for quite some time and is penetrating broader vehicle markets at a much quicker pace than EVs. The impact of partially autonomous systems on oil displacement is difficult to measure at this point, but the theory is that if enough vehicles have these systems, there will be fewer accidents, which leads to less congestion on roadways, which in turn has the benefit of increasing the efficiency of all vehicles on the road, both autonomous and non-autonomous.

There’s also declining vehicle ownership to consider. Bloomberg partially acknowledges this trend in its article, claiming that the rise of ridesharing services may also contribute to greater EV adoption because energy cost savings rise in higher mileage use cases. However, if oil prices per barrel stay in the $40-$80 range for the next decade, gasoline-powered hybrids will likely win the energy cost equation over electric drive in most markets for this particular use case. The greater societal shift away from vehicle ownership is not necessarily as much a boon for EVs as it is a detriment to oil consumption. Greater use of alternatives—public transport, bikes, carshare, etc.—increases fuel efficiency per passenger mile traveled.


The Bloomberg article likely grabbed a great deal of attention by singling out EVs as the cause of the next oil crisis. However, publishing an article that misrepresents the potential impacts of EVs in the greater context of transportation and energy sector trends provides established oil interests a political target in a particularly active election year. With oil prices low and the return of the United States as a leading oil producer, the economic and geopolitical concerns tied to oil consumption are significantly lessened. Therefore, policymakers may be more amenable to reforms that negatively affect EV sales.

While Navigant Research agrees with many of the assumptions Bloomberg makes regarding battery prices and vehicle costs, these assumptions are largely contingent upon scale—and at this stage in the EV adoption curve, scale is a function of positive governing policy.

It’s unlikely that oil interests would be able to end federal EV purchase subsidies, but they have greater influence at lower levels. State and local governments are low-hanging fruit, and oil interests are likely to be effective at ending state subsidies and/or tacking on additional fees for EV owners who pay none or very few of the gas taxes that fund road upkeep. While the Bloomberg article is not igniting oil industry concerns regarding EVs, it adds fuel to their interests. This may be good for Bloomberg, but not so much for EVs, and therefore not so much for the “crisis” prediction.


Zipcar Adds One-Way Carshare Service

— March 4, 2016

CarsharingstandortZipcar is increasing the availability of one-way service in its carshare cities in North America, announcing last week that it would offer this option in Philadelphia, Los Angeles, and Denver. Zipcar, the most well-established and arguably best known carshare company in the world, has now embraced the model of one-way carshare service pioneered by Paris’s Autolib program.

Zipcar had been running a beta program in Boston for 2 years, with 200 vehicles available for one-way service. In Navigant Research’s 2015 Carsharing Programs report, I predicted that Zipcar would adopt this service model in more cities, as one-way service has been one of the biggest disruptive trends in carsharing over the last several years. The other major disruptor in the market is related to one-way service: the entry of automakers in earnest into carsharing programs. Daimler and BMW are the two biggest automotive players in carsharing, and since launching their respective programs, the two companies are capturing a significant portion of the total global carshare membership as of the end of 2015. Both of these programs, Daimler’s car2go and BMW’s DriveNow, are one-way services.

BMW and Daimler seem to have grown by expanding the carshare market, not necessarily by taking market share from incumbents. Zipcar is one of the biggest carshare companies globally, operating in over 400 metropolitan areas in North America and Western Europe, with approximately 900,000 members as of the end of 2015. The vast majority of these members are in North America, where Zipcar is the biggest player in carsharing. However, Daimler and BMW have made claims to having over 1 million and 300,000 members, respectively, even though they operate in only a fraction of the cities that Zipcar does.

Rapid Expansion

This rapid expansion reflects the new opportunity that one-way service presents for carsharing market growth. One-way opens up a different use case than the traditional carshare model of picking up and dropping off a car in the same parking spot. In some respects, one-way service looks more like an Uber or Lyft or other ridehailing type of mobility service. Users can make more spur-of-the-moment decisions to rent a car. These rentals become more attractive for short inner city trips which, due perhaps to weather or a lack of public transit or some other factor, are more conveniently done by car. One-way service also reflects the overall changes happening in the urban mobility market, where people in cities are accustomed to on-demand mobility in a range of flavors, including public transit, ridehailing, bikeshare, carsharing, and others.

Not that traditional carsharing operations will fade away. The Carsharing Programs report forecasts that global membership in carsharing services will rise from an estimated 4.8 million in 2015 to over 20 million in 2024, spread across several business models—the conventional model, the one-way model, and even some unique models like the Kandi Technologies vehicle vending machines in China. Traditional carsharing service will still have a role, as it is a comparatively less investment-intensive operation, and will still fill a need case among users to reserve cars for specific appointments and longer distance driving. One-way services do pose logistical challenges, most notably in securing parking, an issue that caused DriveNow to exit the San Francisco market. Nevertheless, one-way carsharing is expected to see faster growth as companies like BMW, Daimler, and Bollore expand their operations. And now Zipcar has joined the trend.


GM Wants to Be a Carsharing Maven

— January 26, 2016

male hand using navigation system on car dashboardOver the past several decades, Detroit-based automakers have rightly been accused of regularly burying their heads in the sand and ignoring changes in the marketplace that would upend their business. The latest announcement from General Motors (GM) shows that is no longer the case, as the biggest American automaker has launched a carsharing service in Ann Arbor, Michigan that also leverages its established OnStar telematics service.

Navigant Research’s Carsharing Programs report projects that such services will have 23.4 million members globally by 2024, potentially eating into individual vehicle sales. Ford has had a longstanding relationship with ZipCar, BMW is behind the DriveNow program, and Daimler provides vehicles to Car2Go.

Maven, the new service from GM is the latest in a string of moves by the automaker including a $500 million investment in Lyft and the purchase of assets, including intellectual property from the defunct SideCar ride-hailing service. While SideCar shuttered its service at the end of 2015 after failing to gain marketplace traction against larger rivals Uber and Lyft, many of its staff will join GM’s efforts, and the automaker will access to a 2002 patent on determining an efficient transportation route and requesting rides from a mobile device. SideCar founder Sunil Paul declined to use the patent against competitors, and it’s not clear if GM will be able to sue. More likely GM will use the patent defensively if Uber tries to corner the market.

Maven will have the advantage of GM’s longstanding OnStar system, which launched 20 years ago as the first commercial cellular-based telematics service. Many of the same features that OnStar subscribers get through the RemoteLink smartphone app will add to the convenience of using Maven. Using the Maven app, subscribers can reserve and locate available vehicles and remotely start them up to 8 minutes prior to a reservation.

The fleet consists of the four Chevrolet models including the Spark, Volt, Malibu, and Tahoe, allowing users to select the vehicle that best meets their needs on any given day. Rental rates start at $6 per hour for a Volt or Spark to $12 for the Tahoe.

Increasing Autonomy

For now, Maven users will have to go where the vehicles are parked, 11 locations around downtown Ann Arbor and the University of Michigan north campus. However, as GM continues to develop its autonomous vehicle technology and the autonomous hailing service it announced with Lyft at CES, Maven seems likely to morph into this type of service. It’s probably not a coincidence that GM chose to launch Maven at a location directly adjacent to the Mcity autonomous and connected vehicle test facility.

With GM and Ford both extensively dabbling in carsharing and ride-hailing services, Fiat Chrysler is the only Detroit automaker that hasn’t publicly announced any plans in this space, but it’s likely only a matter of time before they jump in as well. With a 30-mile electric driving range, the Chrysler Pacifica plug-in hybrid minivan that was revealed at the recent North American International Auto Show would make an excellent platform for mobility as a service.


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